Traffic grows in Red Sea as more shipping firms risk delays and increased costs by diverting routes
Shipping companies have cautiously welcomed the announcement of a US-led multinational naval force to fend off Red Sea attacks, but are still re-routing vessels as the line of impacted crafts grows.
The world’s second-largest shipping company, Maersk, said it’s “very positive” to have joint efforts on maritime security, but it needs to see more detail and a quick response to avoid delays and spiralling costs.
Chief infrastructure officer Rabab Raafat Boulos said: “With the line of impacted vessels building fast in the area, progressing with speed will be key for the coalition in order to minimise direct negative impact on global trade.”
On Tuesday morning, the firm announced it was re-routing vessels that had been paused in the Red Sea area through the Cape of Good Hope, South Africa – adding up to two weeks and increased costs to journeys.
A build-up of traffic and cargo at ports across the world during the pandemic was behind the supply chain woes that brought about a bout of inflation, before price rises were worsened by the energy crisis following Russia’s invasion of Ukraine.
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In response to the attacks, several multi-national shipping companies have stopped their vessels travelling across the Red Sea, which is south of the Suez Canal a major shipping route.
Maersk was the first firm to pause shipping through the route that shortens shipping times by connecting the Mediterranean and the Indian Ocean via the crucial trade artery that is the Suez Canal.
A string of attacks claimed by Yemen‘s Houthi rebels in the Bab al Mandeb Strait, at the southern end of the Red Sea, has caused companies including oil producer BP from using the route.
Houthis had been targeting delivery boats to and from Israel to pressure the country to cease attacks on Gaza.
Maersk joins the world’s other largest shipping companies who have announced pauses.
The world’s fifth largest, Hapag-Lloyd, also welcomed the creation of a multinational protective operation, called Operation Prosperity Guardian, where US ships will join with vessels from the UK, Bahrain, Canada, France, Italy, Netherlands, Norway, the Seychelles, and Spain in an effort to increase safety in the 20 mile-wide passage.
But Hapag-Lloyd’s Nils Haupt said it’s not enough to ensure confidence and recommence travel through the Red Sea.
“As long as safety and security is not guaranteed we will for sure not pass the Red Sea,” he said.
The international trade union representing workers on ships, Nautilus International, said the commitment of crew protection under Operation Prosperity Guardian.
“No-one should have to risk getting kidnapped or have missiles launched at them while going about their job and Nautilus will do everything it can to protect its merchant navy members,” it added.
Fears of an oil price hike have yet to materialise as the cost of a barrel of the Brent crude benchmark was $77.85 on Tuesday afternoon, below September’s high of $96 a barrel.
Business
‘Knock-back for London’ as AstraZeneca sells shares directly on rival New York Stock Exchange
One of the UK’s most valuable listed companies is to sell its shares directly on the rival New York Stock Exchange, in a move described as a “knock back for London”.
While AstraZeneca will maintain its headquarters in the UK and its primary stock listing on the London Stock Exchange, the news can be seen as a move away from London.
“Although there has been no suggestion that AstraZeneca is imminently going to up sticks and move its primary listing from London, there may be some nervousness this morning around the risk that the UK market might lose one of its largest constituents,” said Russ Mould, the investment director of investment platform AJ Bell.
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AstraZeneca exit is a frightening prospect for the City and the government
The news “does at least hint at the possibility of a more dramatic shift at some point in the future”, Mr Mould said.
There may also be relief that AstraZeneca is not moving from the London Stock Exchange altogether.
“I think there is probably relief that it’s not pursuing a primary listing in New York, but the decision is hardly a ringing endorsement of London,” said Neil Wilson, the UK investor strategist at investment platform Saxo Markets.
“It reflects the fundamental, structural issues in the UK for the largest globally-oriented stocks – the depth and liquidity of its capital markets is falling short of what’s on offer across the pond.”
“It’s also a bit of a knock-back for London”, Mr Wilson said.
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The Cambridge-based pharmaceutical company said the decision to sell shares directly on the New York Stock Exchange – rather than the previous less straightforward system of using American depository receipts – has been made to allow it “to reach a broader mix of global investors” and “make it even more attractive for all our shareholders”.
“The US has the world’s largest and most liquid public markets by capitalisation, and the largest pool of innovative biopharma companies and investors,” the company said in an announcement to investors.
AstraZeneca’s share price was up 0.7% on the news.
Jaguar Land Rover (JLR) has announced it will partially resume manufacturing “in the coming days” after nearly a month in the wake of a cyber attack.
The luxury car-making plants have paused production since 31 August. The cyber attack halted car-making across the supply chain, with staff off work as a result.
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More than 33,000 people work directly for JLR in the UK, many of whom are on assembly lines in the West Midlands, with the largest facility located in Solihull, and a plant in Halewood on Merseyside.
Roughly 200,000 more are employed by several hundred companies in the supply chain, who rely on JLR orders as their biggest client.
“As the controlled, phased restart of our operations continues, we are taking further steps towards our recovery and the return to manufacture of our world-class vehicles,” a company spokesperson said.
The shutdown was said to last until at least 1 October.
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“Today we are informing colleagues, retailers and suppliers that some sections of our manufacturing operations will resume in the coming days,” the company added, days on from the partial restart of its IT systems, which allowed supplier payments to recommence.
“We know there is much more to do, but the foundational work of our recovery is firmly underway, and we will continue to provide updates as we progress.”
Over the weekend, the government said it would underwrite a £1.5bn five-year loan guarantee to JLR.
The promise came as the head of the influential Business and Trade Committee of MPs wrote to Chancellor Rachel Reeves, warning small firms reliant on JLR, “may have at best a week of cashflow left to support themselves” with “urgent” action needed to support businesses.
JLR was just the latest business to be the subject of a cyberattack.
Harrods, the Co-Op, and Marks and Spencer, are among the companies that’ve struggled in the past year with such attacks.
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