News / Red Sea ceasefire sparks hopes for Suez return - but war risk remains

Sailings beginning in March represents the best case scenario for those hoping to see a return to Suez Canal transits, following yesterday’s news that the Houthis appear to have suspended their Red Sea campaign. But insurers are showing little sign of removing the war risk label.

Sharing a letter that it sent to Hamas’ military wing, the Al Qassam Brigade, Yemen’s Iranian-backed Houthi militia did not explicitly state it had ended attacks, but appeared to suggest this was the case, noting it would “reinstate” the campaign if military operations resumed in Gaza

Xeneta’s chief analyst Peter Sand told The Loadstar that the Houthi campaign had been “by far the most important factor out of many geopolitical aspects that impacts container shipping supply chains,” noting the prospect of a large scale return presented a number of questions.

Mr Sand said that the biggest question was whether or not the insurance companies would take off the ‘war risk area’ label following the Houthis announcement, noting that as things stood “it was not crystal clear” whether they would or not.

Stressing hope that “peace holds in the Red Sea” following the Houthi news, an International Union of Marine Insurance spokesperson told The Loadstar the Red Sea was “already an area of concern concerning voyage notification” before the Yemeni group began its campaign.

The spokesperson added: “There is no immediate prospect of it being de-listed by JWC [Nato’s Joint Warfare Centre]. At least part of the Houthi aim was to achieve recognition as a state, and it is currently assessed that further attacks cannot be ruled out.

“What may change is the perception of risk from week to week and that will feed through into the individual pricing of voyages. Whether or not underwriters charge an additional premium and what level will reflect how they assess their exposures.”

Describing it as a “step towards a normalisation,” chief executive of Vespucci Maritime, Lars Jensen, noted that it was worth keeping in mind that a previous ceasefire between Israel and Hamas lasted just two months, from 19 January to 18 March, before hostilities resumed.

Mr Jensen told The Loadstar: “During this period the Houthis had also declared a ceasefire. The current ceasefire has now been in place for one month, this is clearly a sign that we are moving in the right direction but it is also a situation we have seen deteriorate before.”

Given the precarity of the truce – particularly with accusations that both sides have repeatedly broken the ceasefire and of Israel pushing controversial legislation opening up the possibility of prisoner executions – consensus appears to be that we are in a “wait and see” moment.

Asked for a timeframe on when the industry might expect carriers, beyond CMA CGM and some of the regional operators, to return to the Red Sea, Mr Jensen said that they will wait until past the two-month ceasefire seen earlier this year.

“That puts us in mid-December, alongside the start of the seasonal ramp-up towards Chinese New Year, at which point, a sudden switch back to Suez would significantly worsen resulting congestion problems in Europe from shortening the supply chain,” Mr Jensen continued.

“This would point to a switch after CNY (17 February). From a carrier perspective, beginning to shift vessels back towards Suez in March would therefore be opportunely timed with low volumes – in turn mitigating the congestion which will happen in Europe.”

Nonetheless, he cited two caveats: firstly, “hostilities do not suddenly resume in which case we simply see a replay of early 2025”; and secondly that a major carrier other than CMA CGM does not jump the gun, which would provoke others to “quickly follow suit”.

CMA CGM has proven resilient to the threats in the Red Sea, having consistently run services through the waterway during the Houthi campaign, with sources noting this in part due to the owners’ “connections in Lebanon” and also because of the French Naval escorts it has received.

Mr Jensen told The Loadstar prior to yesterday’s Houthi announcement: “My eyes are on Cosco. The Chinese are unlikely to be attacked, so I think Cosco will be the first and that will drag the remaining Ocean Alliance members back and then all the others will have to follow.”