Maersk chief warns Red Sea disruptions may have 'significant' consequences on global growth
The CEO of Maersk, the world's biggest shipping company, warned of "significant" consequences on global growth due to the disruptions in the Red Sea caused by Yemen's Houthi rebels attacks.
“It’s unclear to us if we are talking about re-establishing safe passage into the Red Sea in a matter of days, weeks or months . . . It could potentially have quite significant consequences on global growth,” Maersk CEO Vincent Clerc told The Financial Times.
He told the outlet the closure of the Red Sea to most container shipping companies was "brutal and dramatic" and there were "no winners" in the situation.
Houthi rebels have launched a series of attacks on merchant and commercial vessels in the Red Sea since November, prompting Maersk and other major shipping companies to divert their ships south. The diversions cause significant delays to shipping times, with ships going around the Cape of Good Hope in South Africa to reach Europe.
Cargo prices have also surged in the wake of the disruptions, with experts warning the situation could damage the global economy in the long term.
“At this time when inflation is a big issue, it’s putting inflationary pressure on our costs, on our customers, and ultimately on consumers in Europe and the US," Clerc told Financial Times. “In the short run, it could cause significant disruptions at the end of January, February and into March.”
Maersk's share price rose by a quarter in the past month amid rising cargo prices, the Financial Times reported.
The Iran-backed Houthis say the attacks — an estimated 26 incidents — are in protest of Israel's bombardment of Gaza in its war with militant group Hamas, though some attacks have hit vessels with no clear ties to Israel.
The U.N. Security Council on Wednesday passed a resolution, sponsored by the United States and Japan, that demands the Houthis halt their attacks in the Red Sea. The resolution, which was approved by a vote of 11-0, condemned "in the strongest terms" at least two dozen Houthi attacks. The resolution states the attacks are impacting global commerce and violating navigational freedom.
A U.S.-led coalition of nations have begun patrolling the Red Sea to try to deter attacks.
Clerc's comments come days after the Houthis launched their largest attack yet on Tuesday night when they fired a barrage of rockets and missiles at U.S. and U.K. forces.
The Houthis said fighters were targeting an American ship providing support to Israel.
The rebels earlier this week indicated they do not plan to back down, writing on Telegram, they will continue to “prevent Israeli ships or those headed to the ports of occupied Palestine from navigating in the Arabian and Red Seas until the aggression stops and the siege on our steadfast brothers in the Gaza Strip is lifted.”
Maersk is one of several major shipping companies forced to suspend operations in the Red Sea, others including MSC Mediterranean Shipping, Hapag-Lloyd and CMA CGM and BP.
Clerc on Thursday said he is urging the International community to "do what it needs to do" to reopen the Bab-el-Mandeb strait, which separates Yemen from the northeast coast of Africa the leads into the Red Sea and the Gulf of Aden, the Financial Times reported.
"It is one of the main arteries of the global economy, and it is clogged right now," he said, adding, "It could have wider ranging consequences not only for the industry but for end consumers, product availability, the global economy as a whole."
Asked how it feels to be making more money from a situation that's detrimental to customers and the global economy, Clerc said, “Let me be completely unambiguous: our goal is to establish safe passage and go back to a normal trading pattern. That is what we are deploying all our assets in doing. While we are doing this, we have to sail around the Cape of Good Hope and there are consequences of this.”