Easing of Houthi sanctions on Red Sea ships could free up capacity but lead to congestion at ports
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A sunken vessel is pictured at a site hit by Israeli forces in the Huthi-controlled port of Hodeida on the Red Sea on Dec 21, 2024.
PHOTO: AFP
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SINGAPORE – The lifting of sanctions on US and British ships in the Red Sea by a Yemeni rebel group could spur shipping lines to return to the area and cause “severe disruption” to shipping schedules, an analyst said.
“Ships will not be where they are supposed to be and will arrive at ports much earlier, or later, than scheduled,” Mr Peter Sand, an analyst at freight intelligence platform Xeneta, wrote in a Jan 20 note.
In a Jan 19 e-mail addressed to the shipping industry, Houthi representatives said that with effect from the same day, they would no longer attack US- and British-owned, managed and flagged ships
Only ships wholly or partially owned by Israeli individuals or entities, and Israel-flagged ships, would continue to be targeted, the e-mail said.
The move came after a Jan 18 ceasefire agreement
Since the Oct 7, 2023, Hamas attacks in Israel, and Israel’s subsequent military response in Gaza, the Houthis have attacked commercial ships passing through the Red Sea in support of the Palestinians.
More than 134 ships have been attacked in the Red Sea in 12 months, according to a UN Security Council Panel of Experts report on Yemen published in October 2024.
The attacks made Red Sea transits too risky for many shipping lines, and many have been taking the longer and expensive route around Africa’s Cape of Good Hope to transport cargo safely between Asia and the West.
Mr Jakob Larsen, chief safety and security officer at shipping trade organisation Bimco, told Bloomberg on Jan 21 that assuming the ceasefire holds, and the US also refrains from using force, shipping companies are expected to gradually resume operations through the Red Sea.
But Xeneta’s Mr Sand said an immediate large-scale return is highly unlikely, as carriers will want assurance they have safe passage in the long term.
“Diversions around the Cape of Good Hope are not what the industry wants, but the situation is stable and being managed. It took many months and extreme disruption to achieve this stability, so carriers will be wary of heading back to the Red Sea too soon. If it goes wrong, they’re back to square one.”
Some liners, including Hapag-Lloyd and Maersk, told the Journal of Commerce that they will return to Red Sea transits only when it is safe to do so, but noted that the ceasefire is a step in the right direction.
Mr Sand warned that there will be severe disruption in the immediate period following a return of ships to the Red Sea. “If large numbers of ships arrive at ports at the same time, it will cause massive delays and congestion that ripple across ocean supply chains.”
Such disruptions were seen in 2024, when liners first began rerouting ships from the Suez Canal in the Red Sea to Africa.
Many vessels initially arrived together or unscheduled at the Singapore port owing to less predictable shipping schedules.
Some liners also bypassed other ports and discharged more containers in Singapore to catch up on their next schedules.
All that led to queues lasting for days outside the port before the situation was gradually ironed out.
An S&P Global Intelligence report on Jan 21 noted that “major container shipping lines’ latest schedules suggest they expect to continue to use the Cape of Good Hope routes, as they have since late December 2023, for much of the remainder of 2025”.
The report noted that the Houthis will likely reduce the frequency of attacks on shipping in the Red Sea while the ceasefire remains in place, but added that the ceasefire “is very likely to collapse beyond its initial phase”.
Should the Red Sea fully reopen, however, the main economic impact would be a sudden availability of ships and capacity, which could drive down freight rates for shippers and consumers.
A Jan 20 Jefferies report estimated that 85.5 per cent of the global container ship fleet should be fully occupied in 2025, assuming continued diversions through Africa, but this would drop to 79.5 per cent if Red Sea transits return to normal by the middle of the year.
Mr Sand expects that in the “chaos” as schedules adjust to routes through the Suez Canal – which he said could take one to two months to transition to “normal” operating conditions – spot rates will be “extremely volatile but trending strongly downwards”.
When contacted, the Maritime and Port Authority of Singapore (MPA) said it “is monitoring global developments, including the situation at the Red Sea and its implications on shipping activities”.
It added: “MPA and partners in the port of Singapore are ready to assist ships calling in Singapore to facilitate cargo movements.”
