Shipping shows signs of panic as Houthis menace key trade lane

Container shipping is set to face a crunch ahead of the Lunar New Year holiday as Houthi attacks in the Red Sea restrict capacity, a major industry consultant said. 

The coming weeks are likely to be very difficult as trade volumes ramp up before Lunar New Year, which begins Feb. 10, according to Philip Damas, Managing Director and Head of Supply Chain Advisors at Drewry Shipping. Diversions as a result of the attacks are forcing ships to sail thousands of miles further than normal and are therefore restricting the amount of vessels able to carry goods.

Over the weekend, the number of transits through the Suez Canal fell to the lowest since the waterway was blocked by the Ever Given container ship in 2021, according to Inchcape Shipping Services. It offers another sign of the wider impact of the disruption on world trade, one that’s set to persist in the run up to Lunar New Year.

“There is something of a panic in China now about the availability of capacity,” Damas said. “The next five weeks leading to Chinese New Year on Feb. 10 are going to be very difficult for shippers and for shipping,” though costs could ease after that, he added.

Iran-backed Houti militants in Yemen have been firing drones and missiles at ships passing by the country’s waters, roiling global trade. They say they are targeting vessels with links to Israel to protest against its military campaign in the Gaza Strip, though there have been frequent attacks on vessels with little or no link to Israel. As a result, swaths of global sea traffic is choosing to avoid the waterway and sail around Africa. 

For container ships, that’s particularly key ahead of Lunar New Year, when there is increased shipping demand before the holiday season. Much of China shuts down during the break, leading to higher levels of congestion at ports too. 

Drewry, which offers advisory services to global shippers estimates, that as many as 822 ships, or the capacity of about 10 million containers, have been impacted by the attacks and resulting diversions.

The impact of the attacks is wending its way to other sectors too. Earnings for ships hauling fuel from the Mediterranean to Asia have more than tripled since the start of December to the highest level in almost a year. Shipbroker Braemar last week said that the costs for vessels on any tanker route involving the Red Sea are “red hot.”