Is the shipping industry a good investment sector under the Red Sea attacks?

The Houthi armed forces in Yemen issued a statement on December 15 stating that the organization launched missiles at the container ship “Alanya” and the “Palatiyum 3” bound for Israel. The statement said that the Houthis will continue to block all ships heading to Israel until supplies needed by the people of the Gaza Strip arrive.

Four international shipping companies have successively announced the suspension of navigation in the Red Sea.

The German shipping company Hapag-Lloyd, the owner of the Jesra, announced last Friday (December 15) that from now until today (December 18), all container ship transportation through the Red Sea will be suspended.

Denmark’s Maersk Line also announced last Friday that it would suspend all container ship transportation through the Bab el-Mandeb Strait and the Red Sea.

Mediterranean Shipping Company and France’s CMA CGM asked their cargo ships to suspend sailing in the Red Sea and avoid the Suez Canal route on Saturday.

The industry is worried that global shipping will undergo major changes.

The Red Sea has a very important strategic location and is one of the busiest shipping routes in the world. Public information shows that 12% of the world’s trade transportation passes through the Red Sea region.

If the ships are diverted to the Cape of Good Hope in Africa, long-distance sailing will significantly reduce market capacity, the number of shipping days will increase, and transportation costs will also increase. will rise sharply.

From a strategic standpoint, investors should pay more attention to this event due to its impact.

If the situation in the region worsens cannot be effectively resolved, regardless of whether or not the waterway is closed, shipping freight rates will rise.

In the case of non-closure, the increase in insurance premiums will drive up shipping costs.

In the case of closure, the significant increase in shipping distance will lead to tight transport capacity and longer transportation time, thus pushing up shipping costs.

With the advent of Christmas, transportation has entered the peak season. In addition, shipping companies have recently increased freight rates through various channels. The freight rates in the current shipping market have shown a significant upward trend.

If investors are interested in opportunities in the shipping sector should closely monitor whether the situation is escalating or calming down.