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The boss of shipping giant AP Møller-Maersk has warned it could take months to reopen the crucial Red Sea trading route, risking an economic and inflationary hit to the global economy, companies and consumers.
Vincent Clerc, Maersk’s chief executive, told the Financial Times on Thursday that the closure of the Red Sea to most container shipping after a series of attacks from Yemen’s Houthi militants was “brutal and dramatic”. He added there were “no winners” as a result of the situation, which has forced vessels to take long and costly detours around South Africa.
“It’s unclear to us if we are talking about re-establishing safe passage into the Red Sea in a matter of days, weeks or months . . . It could potentially have quite significant consequences on global growth,” he said.
Maersk is a bellwether of global trade, carrying about a fifth of ocean freight. Clerc urged the international community — led by the US — to do more to allow the Red Sea to reopen for ships following a recent escalation of attacks in the region.
In an indication that threats have also spread to the Gulf, an oil tanker off the coast of Oman was seized on Thursday by what UK maritime authorities said were people in black military-style uniforms.
While no one has yet claimed responsibility for the incident, Tanker Trackers, a private maritime intelligence service, suggested it was likely to be Iran.
A Maersk vessel was attacked in mid-December, causing the Danish group to suspend journeys through the Red Sea, a crucial link between Asia and Europe. The group restarted trips a few days later after a US-led military coalition tried to create safe passage, but it suffered a further attack at the end of December. Last week, Maersk said it would divert ships from the Red Sea around Africa “for the foreseeable future”.
Diverting container ships via the Cape of Good Hope adds about 13,000km in distance for an Asia-Europe round trip, and hundreds of dollars per container, Clerc said.
“At this time when inflation is a big issue, it’s putting inflationary pressure on our costs, on our customers, and ultimately on consumers in Europe and the US,” he added. “In the short run, it could cause significant disruptions at the end of January, February and into March.”
Maersk’s fuel bill will be 50 per cent higher as a result of ships taking the longer route. If unresolved, ships will soon be out of position, threatening logistics and global supply chains, Clerc said.
“We are urging the international community to mobilise and do what it needs to do to reopen the [Bab-el-Mandeb] strait. It is one of the main arteries of the global economy, and it is clogged right now.
“It could have wider ranging consequences not only for the industry but for end consumers, product availability, the global economy as a whole,” he added.
Maersk’s share price has risen by a quarter in the past month as container freight rates have shot up.
Asked how it felt to be making more money from a situation that was hurting his customers and the global economy, Clerc replied: “Let me be completely unambiguous: our goal is to establish safe passage and go back to a normal trading pattern. That is what we are deploying all our assets in doing. While we are doing this, we have to sail around the Cape of Good Hope and there are consequences of this.”
He added that Maersk had little visibility over the security situation around the Red Sea as it was “morphing” all the time as well as being linked to the Israeli-Palestinian conflict.
“The modus operandi evolves. The type of weapon evolves. The geographical range expands. There are a lot of things for us that make the risk levels hard to assess. So we need to be prudent,” Clerc said.
Source: Economy - ft.com
