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The situation in the global shipping market remains bleak.

On Tuesday (January 2nd) local time, A.P. Moller - Maersk A/S Unsponsored ADR, the world's second-largest container shipping company, announced that it will continue to suspend all shipping through the Red Sea and the Gulf of Aden, with the specific resumption time to be announced later.

Two days ago, the A.P. Moller - Maersk A/S Unsponsored ADR vessel "Hangzhou" was attacked twice while sailing in the Red Sea. A.P. Moller - Maersk A/S Unsponsored ADR subsequently announced a 48-hour suspension of vessel crossings in the Red Sea.

Freight rates support, shipping company stock prices soar

A.P. Moller - Maersk A/S Unsponsored ADR's latest statement on Tuesday stated:

"The investigation into the incident is ongoing, and we will continue to suspend all cargo transportation through the region while further assessing the evolving situation. In necessary cases, vessels will be diverted and continue to sail around the Cape of Good Hope in Africa."

According to CCTV News citing information from the US Command, on December 31, 2023, the A.P. Moller - Maersk A/S Unsponsored ADR container ship "Hangzhou," flying the Singapore flag, sent distress signals twice within less than 24 hours. The ship reported being attacked by four Yemeni Houthi armed boats in the southern waters of the Red Sea. The US military dispatched helicopters, sinking three boats and killing some attackers, while one boat escaped. The Houthi armed group spokesperson later stated that 10 members were killed or missing.

It is worth noting that it has only been a week since A.P. Moller - Maersk A/S Unsponsored ADR resumed the Red Sea route. On December 24, 2023, with the implementation of the US-led "Operation Prosperity Guardian" initiative, A.P. Moller - Maersk A/S Unsponsored ADR announced its readiness to resume shipping routes through the Red Sea and is developing plans for the first batch of vessels to pass through as soon as operationally feasible. A.P. Moller - Maersk A/S Unsponsored ADR previously mentioned that although measures are in place to ensure the safe passage of vessels through the Red Sea and the Gulf of Aden, the overall risk in the region has not been eliminated at this stage.

To mitigate risks, several international shipping companies have made the decision to suspend or divert their routes. German shipping giant Hapag-Lloyd also announced on January 2 that, in light of recent events, its vessels will continue to sail near the Cape of Good Hope at the southern tip of Africa until January 9, when a reassessment of the situation in the Red Sea will be made.

Analysts point out that if the crisis further escalates, shipowners may be left with only two options: queuing for passage through the Panama Canal or circumnavigating the Cape of Good Hope. This would result in a decrease in shipping capacity turnover and provide some support for off-season freight rates. As a result, shipping stocks surged on Tuesday, with A.P. Moller - Maersk A/S Unsponsored ADR rising over 7%, Hapag-Lloyd up 3.26%, and Frontline Shipping up 0.55%.

Is the US "Red Sea Escort" Effective?

The ongoing Red Sea crisis has already impacted trade worth $225 billion. Freight forwarding company Kuehne+Nagel stated that approximately 330 vessels have been affected, with an estimated total capacity of 4.5 million containers.

Global trade data provider Kpler reported that the number of vessels choosing to bypass Africa and avoid the Red Sea has increased from 55 last week to 124 this week, compared to only 18 a month ago.

Jean-Charles Gordon, Director of Vessel Tracking at Kpler, commented:

"Our analysis of vessel traffic through the Strait of Mandeb shows a continuous decline in both northbound and southbound vessels."

Image source: CCTV News

These series of data raise doubts about the effectiveness of the US-led Red Sea escort operation. According to Xinhua News Agency's report, it has been about ten days since the United States announced the formation of the Red Sea Escort Alliance. However, many allies are unwilling to publicly announce their participation or even have any relationship with it. The United States claims that more than 20 countries have joined the Red Sea Escort Operation under the codename "Prosperity Guardian," but the list only includes 12 countries, and at least 8 countries are unwilling to acknowledge their participation.

The so-called "contributions" of the US allies to the escort alliance are sometimes just sending a few staff members.

Retired US Navy Rear Admiral Mark Montgomery said that in order to achieve results, the Red Sea Task Force still needs a large number of naval coordination.