SCA denies rumours that Suez might have to close

The Suez Canal Authority on Friday January 12th denied rumours that its operations had been impacted by the Thursday night attack by Operation Prosperity Guardian (OPG) on Houthi land bases.

The statement came as the military forces have advised all merchant ships to avoid the area around Yemen. Likewise the trade associations and security consultants have warned that the situation was likely to remain unsettled and very dangerous for the next few days.

SCA boss Osama Rabie said that “there is no truth to the suspension of navigation in the canal as a result of developments in the situation in the Red Sea region. Navigation is regular in both directions.”

He noted that, as of January 13th, 44 ships were scheduled to transit the canal, with a total gt of 2.3m tons. What that statement did not say was that this represented a 40% decline on mid-December, itself at a time when the conflict was causing concern. On December 18th 77 vessels with a total tonnage of 4m made the transit.

In April 2023 the Suez Canal achieved a total of 95 ships in one day, 43 northbound representing (2.8m tons) and 52 southbound (also 2.8m tons).

The SCA said that it was monitoring the situation closely and was communicating with its customers. The chairman had been talking to Maersk as well as with CMA CGM. The latter has said that it would continue transits of the Suez and the Red Sea on a selective basis. The SCA said the company told them in a call on January 11th that it was closely monitoring developments. The SCA said the French carrier remains “keen to maintain the continuity of transits,” but confirmed that some ships are resorting to detouring around the Cape of Good Hope.

The elephant in the room here is how much ships are paying in transit fees. While the safety of the crew is the publicly expressed priority of all ship operators, the relative cost-to-risk and cost-to-time ratios have to be considered by operators. A lower price for a canal transit would be a factor in making the shorter route more worth the risk.

Hapag-Lloyd and Maersk told reporters on Friday that they appreciated efforts to restore safety to the Red Sea passage. Maersk said that it welcomed the naval presence, but did not refer to the missile and air strike attacks on the Houthis on land.

Maersk said that it hoped that international interventions and a larger naval presence in the Red Sea would eventually lead to maritime commerce to resume through the strait, it said on Friday, following US-UK strikes overnight against Houthi military targets in Yemen. In a statement it said that “we hope that these interventions and a larger naval presence will eventually lead to a lowered threat environment allowing maritime commerce to transit through the Red Sea and once again return to using the Suez Canal as a gateway”.

While it has been noted (see other stories this issue) that the public and mainstream media perception that the Houthis were attacking every vessel in sight was a misguided one, one sector that has been affected disproportionately is container ships.

Container xChange said late last week that the majority of boxships, 500 of the 700 scheduled to make the transit, had rerouted. That was hitting shipping schedules and the cost of shipping.

Drewry reported that its World Container Index increased by 15% on the week with 40-foot containers surpassing $3,000.

The benchmark Shanghai Containerized Freight Index was up over 16% week-on-week to 2,206 points on Friday. The index, which measures non-contract “spot” rates for container shipments out of China’s ports, has gained 114% since mid-December.

Rates on the Shanghai-Europe route rose 8.1% to $3,103 per 20-foot container on Friday from a week earlier, while the rate for containers to the unaffected U.S. West Coast soared 43.2% to $3,974 per 40-foot containers week on week, leading ship broker Clarksons said on Friday.

Meanwhile, the China Containerized Freight Index had its biggest jump on record on Friday in both nominal and percentage terms. The CCFI, which measures both spot and liner contracts, jumped 21.7% to reach 1,140 points, Nokta said.

Peter Sand, chief analyst at freight platform Xeneta, said on Friday that “We are looking at months rather than weeks or days before this crisis reaches any kind of resolution”.

These are still a long way below the rates reached in late 2020 and early 2021, but are also a long-way higher than the rates available in mid-2023, when container ships were plentifully available and most of the boxes were in the right place.