Naval assets – including from Iran – build up in the Red Sea

More nations – including Denmark, Pakistan and Sri Lanka – are sending naval assets towards the Middle East as pressure grows on the Houthis to rein in their attacks on merchant shipping in the southern Red Sea and the Gulf of Aden. Of concern, however, are a trio of Iranian naval ships that have started patrolling the area.

The Houthis from Yemen have been waging a campaign to target Israeli-linked vessels in the wake of the war breaking out between Israel and Hamas three months ago. In total, some 25 ships have been targeted in the past couple of months with drones and missiles, and one car carrier and its crew remain in Yemeni waters having been hijacked in November.

“These attacks are having a real effect on the prices that people have to pay for food, for medicine, for energy. Ships have to get diverted to other places. Insurance rates go up,” Blinken said while on another whistlestop tour of the Middle East yesterday. “And the basic principle of freedom of navigation is what’s at stake. So the international community has a real stake in upholding that principle.”Most containerlines have re-routed their vessels from the Red Sea to longer voyages around the Cape of Good Hope adding up to two weeks of delay. By contrast, tanker and dry bulk diversions have been minimal until very recently.

According to HSBC, the liner diversions have pushed spot rates on the Shanghai Containerized Freight Index (SCFI) to all-time highs, outside of the covid era.

“Should the crisis remain unresolved in the next couple of weeks, elevated spot rates could lead to higher contract rates as liners are negotiating their annual contracts with retailers. This could potentially help prevent the sector profits from declining too much vs the expectations before the disruptions,” a new shipping report from HSBC argued, while analysts at Linerlytica have charted what carriers are up to in terms of choosing to divert or not.

While in the early stages of the Red Sea shipping crisis, dry bulk and tankers remained largely unaffected this is now changing.

Over the past week, the numbers of panamax and geared bulkers entering the South Atlantic from the North Atlantic have jumped according to new analysis from brokers Braemar, signalling some avoidance of the Red Sea. Braemar had detected a similar pattern for larger capesize ships a week ago.For tankers, analysis from Vortexa shows diversions have picked up in the span of the last two weeks, but these are not occurring en masse as tankers and volumes continue to flow via the Red Sea. Instead, these diversions are at large constrained to US/EU/Israel-linked entities.