Container Shipping Needs More Assurances Before Returning to Red Sea: Xeneta

Xeneta warns carriers and insurers remain cautious despite reports that the Houthis have halted attacks on commercial ships. File Image / Pixabay

Container lines are unlikely to make an immediate return to the Red Sea despite reports that Yemen's Houthi movement has stopped attacks on commercial ships, according to freight analytics firm Xeneta.

Carriers will need concrete proof before rerouting ships through the Red Sea area, the firm said in an emailed statement on Tuesday.

The Houthis have indicated they are halting offensive measures against vessels transiting the region but warned that attacks could resume if Israel launches new operations in Gaza.

"Details are sketchy and you cannot base the safety of crews, ships and cargo on the word of Houthi militia," Peter Sand, chief analyst at Xeneta, said.

"Carriers need far more assurance than that and, perhaps more importantly, so do insurance companies."

Some operators, including CMA CGM, have cautiously resumed limited transits, but overall Suez Canal traffic remains well below normal levels.

Recently, the canal recorded its largest container ship transit in two years.

Sand said differences in carriers' risk tolerance and high war risk premiums mean a full-scale return could still be some way off.

"There are still many questions to be answered, but the impact of a largescale return would be seismic for shippers and carriers," he added.

Xeneta noted that a large-scale return to Red Sea routes could trigger a sharp drop in freight rates, as more than 2 million TEU of capacity is currently absorbed by the longer detour around the Cape of Good Hope.

A potential full-scale return to Suez Canal could also lead to lower global bunker consumption. 

“Transits may start to increase if there is a perceived lower risk, but we are unlikely to see an imminent return to 2023 levels," Sand noted.