More major energy and commodities firms are diverting ships away from the Red Sea, despite attempts to stop Houthi attacks
- Major energy and commodities firms are diverting shipments away from routes through the Red Sea.
- Companies are opting for longer routes to avoid possible attacks by Yemen-based Houthi rebels.
Disruptions caused by Houthi rebels are forcing more major energy and commodity companies to avoid routes through the Red Sea area, even as US-led military intervention aims to stem missile and drone attacks on ships in the key waterway.
Australia-based mining titan BHP Group is the latest player to redirect the majority of its shipments from Asia to Europe, avoiding the Red Sea route. This move came right after similar efforts made by Qatar Energy, as well as British oil majors Shell and BP, sources told The Wall Street Journal.
Originating in Asia, BHP's shipments now have to take an extended route, past the Cape of Good Hope at the southern tip of Africa to reach Europe, according to the sources. The new route, experts say, adds nine days and several thousand nautical miles compared to the more direct Red Sea passage leading to the Suez Canal.
Since last October, cargo ships have faced escalating attacks from Houthi militants, an Iran-backed Yemeni group that has targeted US alliance countries for decades. As a staunch backer of Hamas, the Houthis said their attack against international ships passing through the Suez Canal and into the Red Sea, is in retaliation for Israel's bombings in Gaza.
The move by more carriers to divert cargoes come despite US-led military efforts against Houthi forces. Air and naval power from the US and the UK have had some success in thwarting attacks, but not stopping them altogether. President Joe Biden has even said that the strikes are unlikely to completely stop the Houthis from targeting shipping lanes.
Qatar Energy has diverted at least six shipments destined for Europe around the Cape of Good Hope in southern Africa since January 15, Bloomberg reported. Meanwhile, shipping companies, including MSC, Maersk, and Hapag-Lloyd, have been taking similar detours, causing cargo transport times to be 40% longer.
That means Asian-produced products take more time to be delivered to the West, disrupting the global supply chain and potentially creating a new input for inflation to rise.
For American oil exporters, though, there's a silver lining as global demand now favors abundant US shale oil. At midday Thursday, Brent oil prices were up 1.32% to $81.13 per barrel, with West Texas Intermediate crude rising 1.34% to $76.36.