Commercial shipping in Red Sea still considered 'high-risk' by US-led military forces

Commercial shipping in the Red Sea is still considered to be at "high-risk" of attack from Iran-backed Houthi fighters in Yemen, with the industry waiting for a diplomatic truce and a period of at least three months without strikes in the region before they resume activity there, the director of the US Navy-led Joint Maritime Information Center in Bahrain said in an interview.

It remains to be seen if shippers are any better or worse off since military strikes against Houthi-controlled areas in Yemen under US President Donald Trump began March 15, US Navy Captain Lee Stuart said by phone on April 23.

"That's really yet to be determined because right now, ships are still moving through, but at about 50% of what they were pre-November 2023," Stuart added.

The JMIC, which falls under the Combined Maritime Forces in Bahrain, was started in February 2024 by Stuart, who also serves as maritime industry liaison officer to the US Navy Central Command. The center's regular information products now include incident monitoring, reporting and security assessments for the Persian Gulf, the Gulf of Oman and the northwestern Indian Ocean, in addition to the Red Sea, Gulf of Aden and Bab al-Mandab area, and it is expanding its focus to include the entire Middle East regional waters. The updates are provided through LinkedIn.

Stuart said that the value and volume of cargo moving through the Red Sea has dropped by at least 80% "because you're not seeing these massive VLCCs or big energy companies like Chevron, ExxonMobil, BP, Shell, they're not going through."

"And then these ultra-large container vessels that are owned by MSC, by Maersk, by CMA, CGM, they're not going through. They're still going around the Cape of Good Hope for the same reasons of safety of their mariners, safety of their vessels and cargo. And really, it's a reputation thing," he added.

Insurance rates have shot up since March 15 to between 0.8% to 1.5% of hull value, after previously falling to 0.5% to 1% of value, Stuart said, citing conversations with some shippers.

For a VLCC with $310 million on board, "even 1%, you're talking a lot of money," he added, while also cautioning that most shippers don't want to share their insurance details.

When asked what it would take to get shippers back to full activity in the Red Sea, Stuart highlighted the importance of a diplomatic solution, with a commitment from Houthi rebels to halt attacks.

"They also have talked about a sustained period of at least three to six months of inactivity to include kinetic strikes or retaliatory strikes that are going on because of potential collateral damage," he said.

Not counting retaliatory strikes since March 15, the last actual attack on a merchant ship was on Nov. 18, 2024, when the Anadolu S bulk carrier was targeted, Stuart said.

Only one LNG ship has returned since the Houthis began the attacks in November 2023, targeting US, UK and Israeli interests, with Egypt's Suez Canal at the northern tip of the Red Sea losing some $8 billion in revenue, he said.

"There's many shipping companies that do want to go back, but the customers are like, this is my cargo, you are not going to put it at risk," he said. "If you think about just-in-time shipping, whether it be automotive or some business that depends on that, and then all of a sudden, their ship is struck, detained, that shuts down operations, and they can't do that to their customers."

Some shippers have expanded their fleet to account for longer routes to make deliveries, Stuart said.

"So the way that supply and demand are working right now, you've got that they brought in so many ships into service to fill the gap of additional time that it takes around the Cape of Good Hope. And if you were to make that shift back, now you place a lot of these ships that were in service out of service. And now you have a bunch of empty ships that are still costing these companies money."

So even if freight rates are high, "they're still making positive money, but they also realize that there's an impact to the environment, too, the carbon emission that goes out by these longer routes is difficult. And the industry is very much trying to work on a more sustainable fuel options and better environment. So they're kind of caught between a rock and a hard place."

China is sending mostly feeder ships through the Red Sea, and some container traffic but "not like what it used to be," Stuart said.

Russia is moving oil and bulk such as grains south through the Red Sea but even then their ships are still seen going around the Cape of Good Hope off South Africa, he said, adding that there have been Chinese and Russian associated companies that have been attacked.