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IMO Chief Urges Action as Red Sea Attacks by Houthi Forces Disrupt Global Shipping

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IMO Chief Urges Action as Red Sea Attacks by Houthi Forces Disrupt Global Shipping

International Maritime Organization (IMO) Secretary-General Arsenio Dominguez has concluded a diplomatic tour of key Red Sea countries amid escalating maritime threats from Houthi forces. The crisis, which began with the hijacking of the MV Galaxy Leader in November 2023, has seen over a hundred drone and missile attacks on vessels in the area, significantly impacting global trade and seafarer safety. These attacks, reportedly motivated by the ongoing Israel-Hamas conflict, have resulted in four deaths, two sunken ships, and extensive vessel damage, prompting many shipping companies to reroute around the Cape of Good Hope, a costly and time-consuming detour.

Read also: Houthi Attacks Update: East-West Trade Braces for Uptick in Freight Costs in 2024

Dominguez’s diplomatic mission included high-level discussions in Djibouti, Egypt, Oman, Saudi Arabia, and Yemen, where he stressed the urgency of restoring safe navigation in the Red Sea. “The continuous attacks on ships and seafarers in the Red Sea are endangering innocent lives and affecting the entire shipping industry,” he stated, highlighting that international shipping underpins roughly 80% of global trade in goods.

The IMO is exploring ways to support affected nations and uphold the principle of freedom of navigation in the region, which plays a vital role in global maritime trade. “This region has strategic importance and potential for development to support sustainable maritime transport,” Dominguez emphasized.

However, challenges remain as Houthi forces have declared an ongoing blockade against Israeli-affiliated vessels, complicating efforts to stabilize the Red Sea shipping lanes. Yahya Sarea, the Houthi military spokesperson, recently asserted that vessels connected to Israel would remain targets, and alleged that many companies tied to Israel were divesting their assets in response to the attacks.

As the Red Sea crisis continues, Dominguez and the IMO are calling for unified global action to address the escalating threats and ensure safe passage in this critical maritime corridor.

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Hapag-Lloyd and Maersk Boost Earnings Forecasts as Red Sea Disruptions Reshape Global Shipping

Hapag-Lloyd has followed future alliance partner Maersk in upgrading its 2024 earnings outlook, citing higher-than-expected demand and rising freight rates despite operational challenges.

Read also: Maersk Predicts Prolonged Trade Disruptions into 2024 Amid Red Sea Conflict

The German shipping giant announced preliminary results for the first nine months of 2024, reporting a Group EBITDA of approximately $3.6 billion (EUR 3.3 billion) and Group EBIT of around $1.9 billion (EUR 1.8 billion).

“Given the current course of business, characterized by stronger-than-expected demand and improved freight rates, and despite higher costs from diverting vessels around the Cape of Good Hope, we are revising our earnings outlook upward for 2024,” the company said in a statement.

Upgraded Financial Guidance

Hapag-Lloyd now forecasts its full-year Group EBITDA to be between $4.6 billion and $5.0 billion, up from the prior estimate of $3.5 billion to $4.6 billion. Group EBIT is expected to increase to $2.4 billion-$2.8 billion, compared to the earlier projection of $1.3 billion-$2.4 billion.

Despite the strong performance, Hapag-Lloyd cautioned that geopolitical risks and freight market volatility could still impact its outlook. Final results for the first nine months of the year will be released on November 14, 2024.

Maersk’s Parallel Earnings Upgrade

Hapag-Lloyd’s earnings upgrade mirrors a similar move by Maersk, which recently raised its 2024 financial forecast for the fourth time. Maersk reported Q3 revenues of $15.8 billion, with an underlying EBITDA of $4.8 billion, citing a combination of strong demand and disruptions in the Red Sea.

As a result, Maersk’s full-year forecast now projects an underlying EBITDA of $11.0 billion-$11.5 billion, a dramatic rise from its earlier guidance of $1 billion-$6 billion issued in February.

Shipping Industry Adjusts to Red Sea Instability

The ongoing Red Sea crisis, marked by Houthi-led disruptions along vital shipping lanes, has forced both Hapag-Lloyd and Maersk to modify operational strategies. To ensure vessel safety, the two carriers have diverted ships via the longer Cape of Good Hope route, bypassing the unstable Suez Canal. While the diversion increases transit times and costs, it provides greater security for crews and cargo.

The Gemini Cooperation between Maersk and Hapag-Lloyd, set to launch in February 2025, will leverage a hub-and-spoke strategy across seven trade lanes. The goal is to achieve a 90% service reliability rate, far surpassing the industry average of 53%.

 Navigating Market Uncertainty

As geopolitical tensions escalate, shipping companies are increasingly forced to reroute vessels and adjust strategies, reshaping established trade routes. Although these disruptions add to transit times and costs, the resulting surge in freight rates is bolstering carriers’ profits.

The evolving landscape underscores the need for flexibility in global shipping operations, as carriers like Hapag-Lloyd and Maersk adapt to ensure profitability in the face of uncertainty.

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Global Shipping Faces Turbulence: Chokepoint Disruptions Threaten Trade and Supply Chains

The maritime industry is navigating treacherous waters, as critical shipping chokepoints face unprecedented strain, threatening global trade, food security, and energy supplies. According to the 2024 Review of Maritime Transport by the UN Conference on Trade and Development (UNCTAD), the stability of global supply chains is being undermined by geopolitical tensions, climate change, and regional conflicts.

Read also: Global Shipping’s Headaches – a Drought and Rocket Fire 

While maritime trade grew by 2.4% in 2023, totaling 12.29 billion tons, the outlook for 2024 is fragile, with just 2% growth projected. Disruptions at key chokepoints such as the Panama Canal, Suez Canal, Red Sea, and Black Sea are leading to higher shipping costs, longer transit times, and strained logistics networks—putting recovery efforts at risk.

Chokepoint Disruptions and Rising Costs

The Panama and Suez Canals, vital arteries of global trade, are under immense pressure. By mid-2024, traffic through both had dropped over 50%. The Panama Canal faced low water levels due to drought, while conflict in the Red Sea disrupted transit through the Suez Canal, where tonnage declined by 70%.

As a result, ships have increasingly rerouted around the Cape of Good Hope, with arrivals there surging by 89%. However, this shift carries financial consequences. Container ships carrying 20,000–24,000 TEUs on the Far East-Europe route now incur an extra $400,000 in emissions costs per voyage, due to the EU’s Emissions Trading System (ETS). These diversions are adding to shipping delays and contributing to environmental impacts.

Logistical Bottlenecks and Supply Chain Strain

The diversion of vessels has created congestion at major transshipment hubs, including Singapore and key Mediterranean ports, as rerouted traffic overwhelms port capacity. Global vessel demand has grown by 3%, while container ship demand is up by 12%, intensifying strain across supply chains.

The impacts of these disruptions are being felt most by vulnerable economies such as Small Island Developing States (SIDS) and Least Developed Countries (LDCs), which rely heavily on maritime connectivity for essential imports. If disruptions continue, global consumer prices could rise by 0.6% by 2025, while prices in SIDS may increase by as much as 0.9%.

Climate Change: A Growing Risk

Extreme weather events are becoming more frequent, impacting port operations and further complicating maritime logistics. Chokepoints like the Panama and Suez Canals are especially vulnerable to these disruptions, threatening both operational safety and shipping schedules.

UNCTAD’s report urges the maritime industry to invest in infrastructure and capacity building to mitigate the risks posed by climate change. The sector must also accelerate the shift to low-carbon technologies to align with global decarbonization goals.

Decarbonization and Fraudulent Practices: Key Challenges

Despite commitments made by the International Maritime Organization (IMO) to reduce greenhouse gas emissions, the transition to greener shipping remains slow. In early 2024, only half of new ship orders were for vessels capable of using alternative fuels, while aging ships remain in service due to high demand and rising freight rates.

Another emerging challenge is the rise of fraudulent ship registrations. These so-called “dark fleet” vessels operate outside international regulations, posing risks to safety, pollution control, and seafarer welfare. UNCTAD urges countries to support IMO efforts to crack down on these practices and strengthen maritime enforcement.

Building Resilience for Future Disruptions

To safeguard global trade, UNCTAD’s report recommends several measures:

1. Strengthening infrastructure to ensure ports and shipping routes remain operational under stress.

2. Accelerating fleet renewal with a focus on alternative fuels to meet decarbonization targets.

3. Enhancing maritime connectivity for vulnerable economies, particularly SIDS and LDCs, to keep them integrated into global supply chains.

4. Combating fraudulent ship registrations to uphold international maritime standards.

A Critical Juncture for Global Shipping

The maritime sector is facing a perfect storm of disruptions, with chokepoint bottlenecks, climate change, and geopolitical instability converging to threaten global trade. While modest growth is expected in 2024, the industry’s ability to adapt will shape the future of global supply chains. A coordinated global effort is essential to build resilience, lower emissions, and maintain maritime connectivity, ensuring that shipping remains a cornerstone of the global economy.

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U.S. Maritime Administration Opens Applications for Centers of Excellence in Workforce Training

The U.S. Department of Transportation’s Maritime Administration (MARAD) recently announced it is accepting applications for the Centers of Excellence (CoE) designation from eligible post-secondary educational institutions, vocational schools, and nonprofit training organizations. This initiative is designed to prepare Americans for careers in the maritime industry by creating equitable pathways to high-paying jobs.

Read also: MARAD Announces $4.8 Million Funding Opportunity for U.S. Marine Highway Program

The CoE Program is a voluntary initiative that partners with existing training facilities across the country, supporting the maritime industry by helping to build and maintain a skilled workforce. It also aligns with the Administration’s goals of promoting diversity, equity, inclusion, and accessibility in the maritime sector, both for students and professionals.

Under Section 51706 of Title 46 of the United States Code, the Secretary of Transportation can designate an institution as a “center of excellence” if it demonstrates success in maritime workforce training and education.

This program aims to expand opportunities within the maritime industry while ensuring that trainees have access to the resources needed for long-term career success.

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TIA Urges Quick Resolution to Port Labor Dispute Ahead of Holiday Shipping Rush

With the potential for an International Longshoremen’s Association (ILA) strike at East and Gulf Coast ports, the Transportation Intermediaries Association (TIA) is calling for an urgent resolution to the labor dispute as the holiday season nears.

Read also: C.H. Robinson: How Shippers can prepare for a Potential ILA Strike Amid an Increasingly Disrupted North American Shipping Landscape 

TIA President & CEO Anne Reinke stressed the high stakes, noting that a strike would severely disrupt the supply chain, particularly during the peak holiday shipping period. “With 43% of U.S. imports passing through these ports, any delays would create bottlenecks across various sectors, from retail to manufacturing,” Reinke said.

The TIA backs good-faith negotiations between the ILA and United States Maritime Alliance (USMX) to avert a work stoppage that could affect industries nationwide. The association also urged the Biden administration to step in, if needed, to ensure the U.S. supply chain remains intact during this critical period for businesses and consumers alike.

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Maersk Surges Ahead in Q2 2024 Amid Strong Market Demand and Supply Chain Challenges

Maersk (Maersk) has sustained its positive momentum through the second quarter of 2024, achieving notable growth across all sectors and significantly enhancing its financial performance.

Read also: Maersk Predicts Prolonged Trade Disruptions into 2024 Amid Red Sea Conflict

The company reported an EBIT margin of 7.5%, a substantial improvement from the 1.4% seen in the first quarter. Ocean profitability saw a marked increase, while Logistics and Services continued their steady expansion. The Terminals segment also performed robustly.

On August 1st, Maersk revised its 2024 forecast, citing the expansion of the Red Sea crisis and ongoing strong market demand as key factors. The Ocean segment experienced considerable volume growth and higher freight rates, particularly for goods originating from Asia, as supply chain pressures intensified.

However, the Red Sea crisis and the need to reroute vessels south of the Cape of Good Hope led to increased operational costs. Despite these challenges, profitability returned to positive territory. While earnings were lower than in the same quarter last year, the performance was significantly better compared to Q1 2024 and Q4 2023.

The Logistics & Services division recorded a 7% year-on-year increase, driven by higher volumes across all product categories, which more than compensated for lower rates. Profitability in this segment improved both sequentially and year-on-year, thanks to greater asset utilization, effective cost management, and advancements in addressing client implementation issues within North America’s ground freight sector.

Maersk’s Terminals division continued to see increased throughput, particularly in North America. Revenue per move surged, driven by higher tariffs and storage fees, though the cost per move only rose slightly. Strong sales growth and rigorous cost control measures contributed to one of the highest EBITDA levels the company has ever achieved.

Vincent Clerc, CEO of Maersk, commented, “Our results this quarter confirm that all our businesses are moving in the right direction. Market demand has remained strong, and the situation in the Red Sea continues to exert pressure on global supply chains. We anticipate these conditions will persist throughout the remainder of the year. In response, we have invested in additional equipment across all our businesses to better support our customers amid these ongoing disruptions.”

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Rhine River Reopens for Cargo Shipping After Flooding

Cargo shipping on the Rhine River in south Germany resumed on Friday following a closure due to high water levels caused by heavy rainfall, according to navigation authorities. The reopening of the river around Maxau comes after a week of drier weather led to falling water levels, allowing for the resumption of sailings to Switzerland.

Read also: Rhine River Shipping Halted in Southern Germany Due to High Water Levels

The Rhine had been closed to freight shipping at Maxau over the weekend due to extensive flooding in the region. However, northern sections of the river, including key points such as Duisburg, Cologne, and Düsseldorf, continued to operate normally throughout the week.

High water levels had prevented vessels from navigating under bridges, creating a significant disruption in the region. The high water warning center in Baden-Wuerttemberg has cautioned that water levels at Maxau could rise sharply early next week, potentially leading to new closures.

The Rhine is a critical shipping route for various commodities, including minerals, coal, oil products like heating oil, grains, and animal feed. In recent years, the river has also faced challenges from low water levels due to unusually dry summers.

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Descartes Releases May Global Shipping Report: April 2024 Containerized Imports Surpass March 2024 and April 2023

Descartes Systems Group, the global leader in uniting logistics-intensive businesses in commerce, released its May Global Shipping Report for logistics and supply chain professionals. In April 2024, U.S. container import volumes increased 3.0% from March and 9.3% when compared to the same month last year, consistent with a strong and resilient economy in the face of global instability.

Read also: Descartes Releases April Global Shipping Report: March U.S. Import Container Volume Continues Strong Trajectory

After Chinese imports declined significantly in March 2024, they bounced back in April 2024 to levels seen in April 2023. Port transit delays continue to improve for the majority of top U.S. ports, as there has been little impact on volumes at East and Gulf Coast ports from either the Panama drought or the Middle East conflict, which continues to escalate. May’s update of logistics metrics monitored by Descartes shows continued strength in U.S. container imports following the robust first quarter of 2024. Global supply chain disruptions are still anticipated, however, given the ongoing conditions at the Panama and Suez Canals, upcoming labor negotiations at U.S. South Atlantic and Gulf Coast ports, the Middle East conflict, and reduced U.S. port capacity caused by the collapse of the Francis Scott Key Bridge in March.

Month-over-month and year-over-year, U.S. economy proves to be robust in April 2024.

Versus April 2023, U.S. container import volume in April 2024 was up 9.3%, demonstrating exceptional year-over-year performance (see Figure 1). April 2024 volumes edged up from March 2024, increasing 3% to 2,208,849 twenty-foot equivalent units (TEUs). Descartes’ April report, however, noted that the effects of Chinese Lunar Year may have masked stronger growth in March 2024, which likely also softened April’s growth. Compared to pre-pandemic April 2019, volume was up 15.1%.

Figure 1. U.S. Container Import Volume Year-over-Year Comparison

 Source: Descartes Datamyne™

“Despite the March closure at the Port of Baltimore, U.S. imports showed strong performance in April, as they have since January 2024 as compared to 2023,” said Chris Jones, EVP Industry, Descartes. “Port delays also showed continued improvement in April, as volumes at East and Gulf Coast ports have experienced little impact from either the Panama drought or Middle East conflict.”

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Renewed Piracy Menace Endangers Red Sea Shipping Routes

The resurgence of piracy in the Red Sea and the Horn of Africa poses a grave threat to maritime security, with recent attacks by Somali pirates sparking renewed concerns for international trade and the safety of crew members. Exploiting the diversion of naval forces’ attention towards the Houthi crisis, Somali pirates have resurfaced, casting a shadow of fear and instability over the region.

The “Abdullah” Incident: A Grim Reminder

In a harrowing incident off the coast of Mogadishu, the 58,000-ton cargo ship “Abdullah” fell prey to pirate aggression. Pirates boarded the vessel, subjecting the 20-man crew to threats of violence unless their ransom demands were met. Audio messages from crew members to their families paint a chilling picture of the ordeal. Lacking private armed guards and evasive tactics, “Abdullah” was an easy target, highlighting the vulnerability of ships traversing these waters. Regrettably, the “Abdullah” incident is not an isolated occurrence. The Maritime Safety Centre in the Horn of Africa (MSCHOA) has reported six confirmed piracy cases and three attempted attacks in recent months. While tankers like “Central Park” and “Ruen” were eventually released following intervention by US and Indian forces, others like “Lila Norfolk” and “Waimea” faced off piracy attempts with exchanged gunfire.

Read also: Maersk Warns of Continued Red Sea Disruptions, Affecting Global Shipping Capacity

Urgent Measures Needed

With naval resources stretched thin by the Houthi crisis, the onus falls on ship owners and managers to bolster security measures. Ambrey, a security company, underscores the vulnerability of vessels like “Abdullah” due to inadequate safeguards. The absence of private armed guards, evasive maneuvers, and deterrents like barbed wire or water hoses renders ships easy prey for pirates. Despite the perilous situation, the crew of “Abdullah” remains safe, with Meherul Karim, Managing Director of SR Shipping, affirming relentless efforts to negotiate for their swift and secure release.

A History of Persistent Threat

Piracy in the Red Sea and Horn of Africa region is a longstanding menace. Somalia’s political instability and maritime policing shortcomings have long provided fertile ground for pirate activities. The 2000s witnessed a surge in piracy, with Somali pirates orchestrating numerous attacks, resulting in the kidnapping of sailors and hijacking of ships.

International Response and Ongoing Challenges

The international community responded robustly to the piracy surge, deploying multinational naval forces and implementing stringent security protocols. While initial efforts yielded significant reductions in piracy incidents, recent years have seen a troubling resurgence, with 2023 recording 120 reported cases.

Coordinated Action for Sustained Vigilance

Piracy remains a persistent threat, underscoring the imperative for continuous vigilance and collaboration across all stakeholders. Governments, international bodies, shipowners, and managers must work in concert to counter piracy effectively, bolster maritime policing, enhance security measures, and address underlying issues such as poverty and instability. Embracing technological advancements can further fortify efforts to safeguard shipping routes and protect crew members.

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Maersk Warns of Continued Red Sea Disruptions, Affecting Global Shipping Capacity

A. P. Moller Maersk, a leading container shipping company, has issued a stark warning about the ongoing disruptions in the Red Sea, indicating significant repercussions for the industry’s capacity in the second quarter.

Read also: Rising Spot Rates and Container Demand Surge in the Wake of Red Sea Turmoil, ahead of the Chinese New Year

Recent attacks by Iran-aligned Houthi militants have escalated tensions in the region, prompting Maersk to project a notable reduction of shipping capacity between the Far East and Europe by 15%-20% in the coming months. These disruptions force vessels to take longer routes, resulting in increased voyage times and freight rates.

Since December, Maersk and other shipping companies have rerouted vessels around Africa’s Cape of Good Hope to circumvent the risk zone in the Red Sea. However, the expanded threat area and persistent attacks have extended journey times, amplifying costs and logistical challenges.

Maersk anticipates that these disruptions will persist until the year’s end, leading to bottlenecks, vessel congestion, and shortages of equipment and capacity. In response, the company is implementing measures to enhance reliability, including faster sailing and the addition of capacity, with over 125,000 additional containers already leased.

The ongoing disruptions in the Red Sea are part of a broader geopolitical context, with tensions in the region heightened by recent strikes targeting Iran’s nuclear facilities. Despite efforts to safeguard shipping lanes, the continued disruptions underscore the profound impact on global trade and shipping operations.

As the industry navigates these challenges, Maersk’s warning serves as a reminder of the complex interplay between geopolitical tensions and maritime commerce, highlighting the urgent need for strategic solutions to ensure the stability and resilience of global supply chains.