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Escalating Houthi Attacks Prompt Major Freight Firms to Avoid Suez Canal

MSC, the world's largest container shipping line, and two other important goods companies announced their decision to avoid the Suez Canal.

In response to increased assaults by Houthi militants in Yemen, two prominent freight companies, including MSC, the world’s largest container shipping line, announced their decision to avoid the Suez Canal. 

The Houthi attacks target commercial vessels in the Red Sea, disrupting crucial East-West trade routes, particularly for oil shipments, which traditionally utilize the Suez Canal to save time and costs for circumnavigating Africa. 

The escalating attacks have led to a rise in war risk insurance premiums.

Vessels Under Attack: MSC Palatium III and Hapag Lloyd’s Al Jasrah:

The Liberian-flagged MSC Palatium III fell victim to a drone attack in the Bab Al Mandab Strait off Yemen’s southern Red Sea end. 

Although no injuries were reported, the vessel sustained fire damage and was taken out of service. 

Another incident involved the Liberian-flagged vessel Al Jasrah from Hapag Lloyd, which was hit by a missile, as confirmed by the US military.

Industry Response: Maersk, MSC, and CMA CGM Halt Shipments:

Denmark’s AP Moller-Maersk temporarily halted all container shipments through Bab Al Mandab on Friday; a decision echoed on Saturday by Swiss-based MSC and French shipping group CMA CGM. 

CMA CGM expressed growing safety concerns as the situation in the region continues to deteriorate, with the possibility of German container line Hapag Lloyd following suit.

Escalating Conflict and Global Response:

As Houthi attacks intensify, with recent incidents targeting shipping and reaching as far as Israel, global responses are underway. 

US Central Command reported the interception of 14 Houthi-launched drones in the Red Sea, emphasizing no damage to ships. Britain also confirmed its warship intercepted a suspected attack drone targeting merchant shipping.

Diplomatic Efforts and Houthi Talks:

Amid the turmoil, Houthi spokespersons announced engagements in talks mediated by Oman with unspecified “international parties.” 

This development raises hopes of a potential de-escalation, suggesting a willingness on the part of the Houthis to negotiate and address concerns over their operations in the Red Sea and Arabian Sea.

Economic Impact on Global Shipping Routes:

Bab Al Mandab, a critical route for global seaborne commodity shipments, faces disruptions affecting the transport of crude oil and fuel from the Gulf to the Mediterranean and Asia. 

The surge in war risk premiums adds substantial extra costs for voyages through the Red Sea, leading companies like MSC to reroute services around the Cape of Good Hope and extending sailing times for vessels initially scheduled to transit the Suez Canal.

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