Comment: Red Sea threat is to vessels not cargo, so insurers will dictate return

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“Nice of carriers to think of shippers”, a source mockingly said after The Loadstar suggested the Ocean Alliance’s decision to only run through Suez on backhaul routes could be to protect the cargo that would be travelling on headhaul transits.

As we reported yesterday, a customer advisory from Ocean Alliance member OOCL stated that, what it terms the LL4 service – known as NEU4 by the Ocean Alliance and FAL1 by tonnage provider CMA CGM – would return to Asia via Suez, transiting the Red Sea.

This raised some question marks at Loadstar HQ as to why it would be safe to transit on the return to Asia, but less safe on the besieged waterway into Europe – the main thought was the cost of insuring billions of dollars of Europe-destined cargo.

Director of the Global Shippers Forum James Hookham told The Loadstar he doubted carriers were thinking about shippers’ needs when making this decision; instead, he speculated, there may be a more prosaic reason.

“Just thinking out loud, but when heading to Asia, vessels are not only carrying empties, they are mainly carrying empties, so the logic behind this decision could be that there is less risk in terms of the knock-on delays a carrier is likely to experience,” he said.

“Then the other thought is that if a vessel is heading south through Suez, it has already passed Israel, so it is not heading towards one of the Houthis’ intended targets – and if it did stop in Israel, the Houthis would already know.”

Pressed on the topic of insurance, Mr Hookham said as far as the cargo was concerned, the Red Sea threat to it was elsewhere – piracy or hijackings – but what made the situation in the waterway unique was that the vessels themselves were targets for destruction.

Noting he was “not sure the premium to the cargo matters” in the calculation, he said the insurance focus would be on a ship itself, because the financial threat in the Red Sea came in the form of the ship’s immobilisation and potential sinking.

“If you remember two years ago, the level of activity was relatively low and what made the carriers say ‘we’re turning left to Africa’ was one or two really nasty incidents, and this coincided with the hull insurers saying ‘this looks dodgy’,” Mr Hookham added.

“And since this point, the question has been, will the insurers actually offer a reasonable quote to insure the navigation of a ship through those waters? This is the bigger blocker when it comes to financial side of things – unless you lose the ship, is the cargo much at risk?”

For the Ocean Alliance, it helps that the tonnage provider in question, CMA CGM, continues to be escorted through the Red Sea by French warships; for other carriers, however, there seems no indication of any sort of jumping the gun on a return.

Testifying to this, one need only look to last week’s calamitous Suez Canal Authority press conference when, ill-intentioned or not, it appeared to be dictating the resumption of Maersk’s Red Sea transits, only for the carrier to hit the brakes.