The Red Sea crisis might last into the first half of 2025 with the after-effects lasting much longer, according to shipping experts, as figures from the commercial and military sectors urge for diplomatic pressure to end the attacks on merchant vessels passing through the Suez Canal.
In a video update, Rolf Jansen, CEO of Hapag-Lloyd, said that “no one knows when this goes back to normal”, adding that the shipping giant was planning to manage the effects of the crisis on its business until at least the end of the year.
Houthi rebels have been attacking commercial shipping vessels passing through the Suez Canal since October 2023, with the stated aim of attacking Israeli-linked ships.
The group ramped up their attacks drastically in November, pushing ships to take lengthy diversions around the Cape of Good Hope.
‘Unchanged’
Lars Jensen, a leading maritime analyst and CEO of Vespucci Maritime, said at the same event that the situation had essentially remained “unchanged” since mid-December and that maritime trade might be “in this for the long run”, with no prospect of the Suez Canal reopening this year.
Bjorn Vang Jensen, a shipping analyst, said that the crisis could last into Q1 of 2025 before a permanent solution is found as the industry settles into a ‘new normal’.
Diplomatic and political
All agreed that the crisis is unlikely to be solved militarily, instead requiring economic and diplomatic solutions.
The Houthi rebel group have been fighting forces from Saudi Arabia and the UAE for many years, and are used to dealing with highly equipped military forces.
Moreover, despite the US-fronted Operation Prosperity Guardian and the EU’s Operation Aspides, rebels have continued to attack shipping for eight months, raising questions as to how effective any military action will be in the long-term.
“Although the Prosperity Guardian coalition has been relatively successful in terms of its ability to engage Houthi missiles, most shipping has nonetheless been rerouted around the Cape of Good Hope,” according to Dr Sidrath Kaushal, senior research fellow at the Royal United Services Institute.
Solution not weapons-based
The US Fifth Fleet’s commander, vice admiral George Wikoff, admitted that the operations were more of a “shock absorber”, in a speech two weeks ago to the Centre for Strategic & International Studies.
The solution is not going to come “at the end of a weapon system”, but instead via the international community, said Wikoff.
“We could certainly try with some warships and some [missiles] and some folks [are] trying their best to preserve maritime security, but this is going to require a global solution.”
Rolf Jansen said that no major shipping company would want to expose their crews and vessels to danger, even after it appeared likely that the threat was ‘over’.
“No one wants to send people in if there’s a realistic chance of someone getting killed. We need, in reality, a prolonged time where there are no attacks.”
Bjorn added that there would need to be “very high levels of safety to go in”, possibly requiring well-protected convoys, as well as the “prolonged” absence of attacks for companies to feel safe.
“We saw one carrier was able to sneak through the Red Sea more often – because they had very strong naval protection on a ship-by-ship basis – but that's not realistic [for most].”
Rates
In terms of shipping costs, Lars Jensen agreed with the overall industry sentiment that peak season had passed but the rate market wasn’t collapsing.
Instead, he predicted a high ‘baseline’ that would drop slowly until just before China’s Golden Week in early October – a important date in the shipping calendar.
“I agree with Lars, I don’t think we’ll see a full-scale collapse,” said Bjorn, adding that “if it were me”, he would budget for current rates minus 20% later in the year.
