Red Sea shipping crisis unlikely to end soon, Hapag-Lloyd CEO says

HAMBURG – Attacks on cargo vessels in the Red Sea by Yemen-based Houthi rebels are unlikely to end soon, forcing shipping companies to avoid the route through the Suez Canal, the head of Germany’s Hapag-Lloyd told reporters on Jan 31.

“We don’t think it will be over the day after tomorrow,” chief executive Rolf Habben Jansen said at a news briefing in Hamburg. “Whether it’ll be one, three or five months, I don’t know.”

A

political deal and a mission

to protect freight vessels might bring a resolution within six months, he added.

Hapag-Lloyd, the world’s fifth biggest container liner, has joined other shippers in taking longer, costlier journeys around Africa, after one of its ships was attacked on Dec 15.

It was important that the European Union actively supported a multinational naval coalition to protect commercial traffic in the region, Mr Habben Jansen said.

Rerouting cargo ships around Africa

adds two to three more weeks to the journey. This results in a drop of 150,000 standard containers (20-foot equivalent unit or TEU) being transported in December compared with original expectations, he said.

Hapag-Lloyd transports roughly one million TEU per month on its 264-strong fleet.

Mitigations have included buying more containers, adding 125,000 in TEU capacity at a cost of US$350 million (S$469 million), it said.

But using more ships to meet demand on time, and running those faster on more fuel, involved higher costs for customers.

On Jan 30, Hapag-Lloyd reported earnings before interest and tax for 2023 of €2.5 billion (S$3.6 billion), a fraction of 2022’s €17.5 billion.

It cited lower freight rates as global supply chains normalised following the pandemic. REUTERS