Red Sea Trade Route Faces Prolonged Uncertainty Despite Gaza Ceasefire
Global shipping companies remain hesitant to return to the Red Sea trade route, even after a ceasefire between Israel and Hamas, as ongoing security concerns over Yemen’s Houthi attacks persist.
Read also: MO Chief Urges Action as Red Sea Attacks by Houthi Forces Disrupt Global Shipping
Persistent Threats Undermine Confidence
Yemen’s Houthi leader recently declared that the group would monitor the ceasefire and potentially resume attacks on shipping if the truce is breached. Since November 2023, the Houthis have conducted over 100 attacks on vessels, sinking two ships, seizing another, and killing at least four seafarers, citing solidarity with Palestinians in Gaza.
This wave of attacks has caused significant disruptions in global shipping and led many companies to divert vessels around the Cape of Good Hope, bypassing the Red Sea and the Suez Canal entirely.
Industry Leaders Opt for Safer Routes
Executives across industries, including shipping, insurance, and retail, emphasize that the risks in the Red Sea remain too high. Jay Foreman, CEO of Basic Fun, a U.S.-based toy supplier to retailers like Walmart and Amazon, stated, “I’ll spend the extra money and send everything around the tip of Africa. It’s just not worth taking a chance.”
Similarly, Matt Castle, VP of global forwarding at logistics giant C.H. Robinson, noted that a swift return to the Suez Canal is unlikely, citing challenges such as high cargo insurance costs and the complexities of revising ocean shipping plans.
Trial Voyages to Test Ceasefire Credibility
Even if the Houthis halt attacks, full resumption of Red Sea trade may not occur until mid-2025. Craig Poole, managing director of Cardinal Global Logistics, suggested that shipping lines would likely conduct trial voyages to verify the ceasefire’s stability.
Larger vessels, such as tankers carrying liquefied natural gas, face additional delays due to the heightened risks of transporting flammable cargo. Norwegian shipper Wallenius Wilhelmsen and retailers like H&M and Lidl have also stated that they will wait for clear evidence of safety improvements before resuming operations through the Red Sea.
Rising Insurance Costs Compound Risks
War risk insurance premiums for Red Sea voyages remain elevated, adding hundreds of thousands of dollars in extra costs per trip. Current rates range between 0.6% and 2% of a vessel’s value, particularly for ships associated with Israel or the U.S.
The European Union’s naval force in the Red Sea has maintained its threat assessment, underscoring the ongoing risks.
Outlook: Waiting for Stability
With high stakes for crew safety, cargo security, and operational costs, the Red Sea trade route is unlikely to regain its pre-crisis status soon. Companies and insurers will continue to monitor the situation, prioritizing stability before committing to renewed use of this critical shipping corridor.
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