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Shipping industry cautious about red sea trade despite ceasefire agreement

The shipping industry is navigating through a period of uncertainty concerning the safety of the Red Sea trade corridor despite the recent Gaza ceasefire agreement. The Humanitarian Operations Coordination Center (HOCC) in Sanaa, tasked with mediating between Houthi forces and the commercial shipping sector, has declared a conditional cessation of its maritime restrictions on vessels owned or flagged by the U.S. or Britain. This cessation is subject to revocation should there be any acts of aggression by the U.S., U.K., or Israel against Yemen. The enforcement of this decision hinges on the comprehensive adherence to the Gaza ceasefire, specifically the termination of assaults on ships linked to Israel.

Since November 2023, the Houthi militia has launched over 100 attacks on maritime avenues in the southern Red Sea and the Gulf of Aden, routes vital for international commerce. These assaults, driven by the group's support for the Palestinian cause, have involved the sinking and capturing of ships, leading to seafarer casualties. Consequently, numerous shipping firms have rerouted their operations, especially around the Bab al-Mandab Strait, to circumvent the area.

In light of the HOCC's announcement, the shipping and insurance sectors are proceeding with caution. The looming threat of Houthi provocations, coupled with increased war risk insurance costs and the possibility of renewed hostilities, has led companies such as H&M, Wallenius Wilhelmsen, and Tailwind Shipping Lines to postpone the reinstatement of their Red Sea passages. Industry leaders have indicated that a comprehensive evaluation of the ceasefire's durability, including pilot voyages, will be necessary over the coming months.

The ongoing captivity of the Bahamas-flagged vessel, Galaxy Leader, by Houthi forces underscores the persistent economic and human toll of these maritime disruptions. With elevated war risk insurance premiums and the financial burden of detoured operations, many firms are exploring alternate pathways, including navigating around Africa's tip, pending a more stable security landscape. This scenario highlights the intricate interplay between regional geopolitical dynamics and worldwide trade, leaving the future of Red Sea commerce in a state of flux.

Source: Reuters

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