Shipping operators return to Red Sea after Houthi ceasefire but risks remain

Vessel owners are concerned that the Israel-Hamas ceasefire might not hold

The Houthis have conducted more than 100 ship attacks since November 2023 in the Red Sea route. EPA

Some shipping operators are opting to transit the Red Sea as attacks by Yemen’s Houthi militant group have ceased following a ceasefire between Israel and Hamas last month. However, they remain cautious, viewing the situation as a “fragile ceasefire”, according to industry sources.

Last month, Israel and Palestinian militant group Hamas reached a ceasefire agreement after more than a year of conflict. Following the deal, the Houthis announced that they would halt attacks on most vessels in the Red Sea but said they would continue attacking ships owned by Israeli companies or those flying the Israeli flag.

“We're not seeing the damage or the targeting of the vessels in the same way that we were prior to Christmas,” said Rohan Davies, managing director of marine and energy at Markel, an insurer.

“We can see that in the current environment, risk has reduced for us, so the insurance pricing is starting to drop. On the other hand, this reduced risk also means that some ship owners are now happier to transit the Red Sea than before,” Mr Davies told The National.

The Houthis conducted more than 100 ship attacks since November 2023 in the maritime route, which is responsible for about 12 per cent of global trade and 20 per cent of global container shipping.

Many shipping companies, including container shippers and energy companies, rerouted their vessels around the Cape of Good Hope in South Africa to avoid the risk of missiles attacks in the Red Sea, resulting in longer travel times and higher costs.

The situation is now “relatively calmer”, thanks in part to increased efforts by several nations to secure the Red Sea region, both militarily and through political engagement, Reggy Vermeulen, chief executive of Oman’s Duqm Port, told The National.

“We have now come to a certain bit of predictability in the shipping between the east and the west.”

For companies still using the Cape route, the extra time is now a known factor. As a result, the situation is “nearly back to normal,” Mr Vermeulen said, adding that industry stakeholders were closely following the ceasefire process.

The Duqm port on the southeastern coast of Oman has inland access to Saudi Arabia and the UAE, while also being strategically positioned to serve the entire Indian Ocean.

The port is a crucial part of Oman's goal of becoming a major exporter of green hydrogen and related products like ammonia.

There are no green hydrogen exports from Duqm as most projects are still in the development phase.

However, the port has experienced growth in general trade volume over the past year and expects this trend to continue, especially if major projects – such as a $3 billion green steel plant by Oman-based Jindal Shadeed Group – become operational, Mr Vermeulen said.

“Last year, we saw an increase in volume at the port of Duqm, and we are confident that this growth will continue, especially if some of the big projects we are working on materialise. [If that] happens, we will see a massive increase,” he added.

The port operator is “bullish” on green hydrogen – seen as key to decarbonising hard-to-abate sectors – and has dedicated a significant part of its liquids terminals for carbon-free exports, Mr Vermeulen said.

Gradual shift

Typically, changing shipping routes is a complex process due to the long transit times and the potential for disruption, a senior official from Oman’s Asyad Group said.

“In this sector, flows usually do not return very quickly. That’s simply because shipping networks can take two or three weeks to travel from point A to point B, and then suddenly changing them would have consequences,” Juma Al Maskari, head of logistics at Asyad, told The National.

“This [can cause] issues like port congestion, among others. In general, in shipping, when trade routes change, they do so gradually,” he added.

While some ship owners are cautiously resuming Red Sea transits, encouraged by recent successful passages, others remain hesitant. Large fleets with profitable alternative routes around the Cape of Good Hope are sticking with them, citing continued uncertainty.

“What the analysts are telling us is that this is a very fragile ceasefire. At the moment, it's holding, and I think the fact that we've got through a couple of weeks of it is exceptional, but I still think that fragility is there,” Mr Davies said.

“A lot of vessel owners see that fragility as well,” he added.

Some of the bigger operators are eager to return to the Red Sea route to save fuel and increase cargo volume due to faster turnarounds. However, they need guaranteed safety and stability before risking their expensive ships and cargo, Mr Davies said.

The ceasefire plan unfolds in three 42-day phases. The initial phase, currently under way, involves the release of Israeli hostages – women, children, elderly individuals and those who are wounded – in exchange for a significant number of Palestinian prisoners.

However, the ceasefire's long-term viability has come under question.

On Tuesday, Israeli Prime Minister Benjamin Netanyahu threatened renewed fighting if hostages were not released soon, while Hamas, citing alleged Israeli breaches of the agreement, delayed hostage releases but remained open to them if mediators pressured Israel to comply.

Meanwhile, the Houthis are likely using the relative pause in military operations during the initial phase of the Gaza truce to recoup combat effectiveness in the areas of Yemen that they control, particularly along the Red Sea coast, S&P Global Market Intelligence said in a report last week.