Maersk has issued a results “up-grade” one week ahead of its third quarter results. The shipping line stated that “on the back of strong third quarter results combined with strong container market demand and the continuation of the Red Sea situation, APMM now expects for the full year 2024 underlying EBITDA of USD 11.0 to 11.5bn and EBIT of USD 5.2 to 5.7bn (previously USD 9 to 11bn and USD 3 to 5bn, respectively)”.
Maersk also revised upwards the growth of the global shipping container market from 4-6%, which it forecast earlier in the year, to “around 6%”, illustrating that the rise in freight-rates is not just about the Red Sea crisis. Yet the Red Sea crisis is still important. The latest news from the area is that the Houthis are claiming to have hit a Maersk vessel with drones on Monday 21st October, although the ship, a 4,957 TEU vessel chartered from the ship owner Costamare, appears unharmed and is reported to be approaching Dubai.
The problem of the Houthis is not going away. A possible further development of the Red Sea crisis is the equipping of the North Yemeni group with more powerful Russian anti-shipping missiles. There is speculation that Russian collaboration with Iran may result in the Iranians giving the Houthis more powerful Russian weaponry than the mix of Iranian-made drones and ballistic missiles that they have been firing at ships for the past two years. One option might be for the Houthis to use the Russian P-800 Oniks missile which is supersonic and has a range of 200 miles. Operating such a weapon requires considerable infrastructure and trained missile crews. Yet, if the Russians or Iranians did position such a weapon in Yemen they could threaten ships in the central Indian Ocean and approach to the Straits of Hormuz.
The Houthi problem is largely driven by the conflict between Israel and Iran. So far, despite Israel and Iran striking at each other, escalation has been controlled. However, the option of escalating the actions of the Houthis is one option that Iran has in its conflict with Israel and the US. The implications for the shipping market are that the situation is unlikely to improve until the hostilities between Israel and Iran and its proxies are, if not resolved, then stabilised. This is not as distant a prospect as might be assumed, as Iran seems to be on the defensive in the face of Israel’s offensive against Iran’s other ally, Hezbollah. However, the prospect that all violence would end before Christmas seems unlikely and the possibility of increasing activity by the Houthis in response, for example to a wider attack by Israel on Iran, cannot be dismissed. Therefore, the Red Sea Crisis is likely to persist in the short-term and may get worse.
Source: Ti Insight
Author: Thomas Cullen
