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The Red Sea Crisis of 2023-2024: Five months of Attacks

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Iakovos ( Jack ) Archontakis
Commercial Director TMC SHIPPING .

John Pikramenos
Chartering Dept TMC SHIPPING

The Dry Bulk Shipping market has been disrupted significantly from the Houthis’ unprovoked attacks against commercial ships passing the Red Sea, with trade passing Suez shrinking by 50% within the first two months of 2024 y-o-y.

The first and immediate reaction of many owners and operators of all vessel types was the strategic routing of voyages around the African continent, which adds about 3,000 nautical miles extra to any journey between Europe and Asia.
The significantly increased distance and consequent shipment delays has directly increased voyage expenses and in response market rates have been pushed upward for trades that would otherwise utilize the Bab-El-Mandeb Strait and the Suez Canal. But rates have also increased in a similar pattern for trades that still utilize the shortest route passing through the Red Sea, as operators and owners are marketing tonnage with the implementation of additional war risk premiums in their pricing strategy to account for the associated risks.
The initial incident which signifies the start of this crisis, occurred back in the 19th of November 2023 when car carrier Galaxy Leader was hijacked in the Red Sea, because it was partly owned by Israeli shipowner Abraham Ungar. As of 29th March 2024, there have been over 40 attacks on vessels whose owners or managers are of various nationalities.
So far, the most severe occurrences where the fatal attack on MV True Confidence 54 nautical miles (100 km) southwest of Aden on 6th of March 2024, in which three seafarers were killed in the fatal attack on MV True Confidence, and the UK-owned MV Rubymar sank 93 miles (150 km) east of Aden, two weeks after being hit by multiple missiles, on February 18th, 2024.
Despite the high risk of navigating near Yemen, many vessels continue to operate in this area, attracted by potential earnings from insurance and hire premiums. Attacks may be targeted solely against ships that are considered to have a direct or indirect relation with Israel, but this does not appear to be guaranteed thus all vessels operating in the Red Sea – GoA region still face a significant threat.
In response to the attacks, the militaries of the United States and United Kingdom, with support from Australia, Bahrain, Canada, Denmark, the Netherlands, and New Zealand have positioned a notable amount of naval power in the Middle East with Navy assets operating in the Red Sea since December as part of Operation Prosperity Guardian, a U.S.-led, multinational coalition established to counter attacks by Houthi terrorists on merchant and naval vessels.
The US Department of Defense has reported several rounds of missile strikes against Houthi military bases in Yemen as part of the international collective effort to restore stability in the area by eliminating the terrorists’ ability to attack commercial shipping. The International Transport Workers' Federation (ITF) is also taking part in the effort to protect innocent parties, urging ship managers of all shipping segments to divert their routing around the longer route to ensure the safety of seafarers.
TMC MARITIME CO. March 2024
The below figure demonstrates the BDI Composite Index and the BHSI the past five months from November 2023 up to the end of March. There appears to have been a peak in the Baltic Dry Index and the Handy Index about three weeks after the first Hijacking incidence in Week 46. It should not be taken for granted that this rise in the cost of shipping goods is a direct consequence of the Red Sea crisis nor can the increase be completely attributed to the situation in general.
In the context of the Red Sea crisis, it's important to recognize the broader geopolitical landscape in which these events unfold, including ongoing tensions in regions such as Gaza. While the crisis in the Red Sea, marked by the Houthis' attacks on commercial shipping, has direct implications for global trade and maritime security, it also occurs against a backdrop of wider regional conflicts.
After week 49-50 of 2023, the market declined steadily, and the big picture indicates that the market cooled down and shipping costs stabilizing in the first 8 weeks of 2024, while demonstrating decreased volatility altogether up to Week 9, when the market across all segments rose steeply. This pattern is obviously more prominent in the larger sizes driven at large by the significant rise of the Capesize market.
However, the Supramax and Panamax indexes also increased quickly until about Week 12 since when a slight decline has been observed. This decline is not so prominent in the Handy market which only appears to be stabilizing past week 10 to 13.

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