In this article, Pole Star Global provides an update on the Red Sea crisis, examining the potential reopening of the region following the Gaza ceasefire.
The Houthi militant group in Yemen has pledged to avoid attacking UK- and US-affiliated ships in the Red Sea. However, the global shipping sector remains cautious, closely monitoring the situation and refraining from resuming operations in the region for now.
In the meantime, stakeholders must stay vigilant and develop a comprehensive strategy for resuming activities safely. With this in mind, this article outlines essential security protocols and operational improvements necessary for a secure re-integration into the region.
Red Sea Disruption: How It Has Affected Global Shipping to Date
The Red Sea serves as a vital trade route. However, escalating hostilities in the region have significantly disrupted shipping lanes.
As of November 19, 2023, attacks by the Houthi militant faction in Yemen prompted 90% of vessels to avoid the Suez Canal and Red Sea, opting instead for the longer route around Africa via the Cape of Good Hope. For instance, carriers such as Maersk and MSC chose this alternative path. Since the start of the Houthi-led campaign, there have been over 100 confirmed attacks on commercial vessels.
This disruption has removed 12% of global fleet capacity from the market, putting considerable strain on supply chains and causing spot freight rates to triple in some instances.
Fortunately, there’s been a decrease in attacks in recent months. That is, the number of incidents peaked in Q1 2024 with 36 attacks but dropped to eight in Q3 and seven in Q4.
Following this trend, Houthi leaders have since pledged to avoid targeting US- and UK-affiliated ships. This has sparked cautious optimism among stakeholders, with many stating they’ll only resume transits once full security can be assured. This is a process that could take months, as maritime risk specialist Ambrey highlights:
“Provided the ceasefire holds, and the Houthis signal their intent to honour it, the return of shipping to the Bab el-Mandeb Strait will occur gradually.” – Ambrey, Maritime Stakeholders Weigh In on Potential Red Sea Reopening During Gaza Ceasefire
In this uncertain environment, vigilance is key. Strengthening security protocols and implementing operational improvements will be essential for ensuring safety, stability, and competitiveness.
Evaluating the Security Risks of Resuming Red Sea Operations
The Houthi militant group’s ceasefire remains fragile, with the risk of renewed attacks if tensions in Yemen escalate.
Additionally, the group still claims the right to target Israeli-flagged or wholly Israeli-owned vessels, further heightening security risks.
Given these factors, resuming operations in the Red Sea raises three key security concerns that stakeholders must carefully evaluate.
- Threat of Attacks: While signs of conflict de-escalation are promising, the situation remains unstable. Resuming Red Sea transits exposes vessels to significant threats, particularly to crew safety and the security of cargo.
- Use of Advanced Weaponry: Recent incidents have highlighted the deployment of sophisticated weaponry, such as drones, by hostile groups. These relatively inexpensive and hard-to-detect devices pose a growing threat to maritime security in the Red Sea. There is also concern that warfare is shifting towards electronic tactics, where cyber-attacks and electronic disruptions could disable critical navigation systems, communications, and tracking technologies.
- Congestion and Accident Risk: An influx of vessels rerouted through the Red Sea will exacerbate congestion, raising the likelihood of accidents and further straining safety measures.
Financial Impacts of Possible Freight Rate Surge and Insurance Premiums
As a vital trade corridor connecting Europe, Africa, and Asia, the reopening of the Red Sea is expected to bring a surge in shipping and cargo traffic. Analysts predict that the return to the shorter Suez Canal route could add 1.8 million TEU of excess capacity, disrupting the balance between supply and demand. With more ships available for the same amount of cargo, this could put downward pressure on freight rates. Traditional strategies, such as scrapping older vessels and implementing slow steaming, may not be enough to mitigate this imbalance, leaving carriers under financial strain.
However, not all analysts agree with this assessment. Others estimate that broader trends in global trade will help offset the impact on freight rates.
For example, earlier in 2024, the longer route around the Cape of Good Hope increased demand for product tankers, pushing freight rates higher. But as Europe moved towards importing more fuel from the U.S. Gulf – a shorter and more cost-effective route – this additional demand has since diminished. If the Suez Canal regains stability, it could lead to an increase in fuel shipments from the Asia-Pacific to Europe. This would boost demand to balance the potential increase in ship supply.
Moreover, the transition back to normal trade routes will be gradual, not immediate. Some shipping companies may delay their return to the Red Sea due to security risks or contractual obligations, further easing concerns about an abrupt flood of excess capacity.
An additional major financial risk is the expected increase in insurance premiums. The Red Sea has been classified as a listed area by the Joint War Committee of Lloyd’s and London market insurers, granting insurers the option – but not the obligation – to impose additional premiums.
War risk premiums have already surged. Before the recent Hamas-Israel conflict and Houthi involvement, rates were just 0.05%, with some underwriters waiving them entirely. By mid-December 2023, they’d spiked to 0.7% of a vessel’s hull value, and have since climbed to 1% of an insured vessel’s value for a ship travelling via the Red Sea.
At the same time, insurers are tightening or withdrawing Red Sea coverage. Some now exclude vessels linked to the US, UK, or Israel, with restrictions based on ownership and flag status. Others refuse to insure Red Sea transits altogether.
With the persistent Houthi threat and uncertainty over the ceasefire, insurers are expected to continue raising rates, imposing policy carve-outs, or issuing full exclusions.
The Impact of Growing Vessel Traffic on Congestion and Operations
Whether freight rates rise or fall, both scenarios predict a surge in vessel traffic through the Suez Canal and Red Sea, contributing to higher congestion in these key maritime corridors. This expected increase in traffic brings with it several operational challenges:
- Delivery Delays: Mismatched arrival times at ports can create bottlenecks, delaying cargo processing and extending delivery timelines.
- Heightened Risk of Accidents: More vessels navigating the same waters raises the likelihood of collisions and other maritime incidents, putting both human safety and the environment at greater risk.
- Pressure on Port Infrastructure: A sharp rise in ship arrivals, alongside the delivery of a record number of new vessels in 2025, could strain port facilities, leading to inefficiencies and backlogs, and causing longer wait times.
- Operational Disruptions: Carriers will need to adapt schedules and realign logistics to account for the reopening of Red Sea routes, further complicating supply chain coordination.
Addressing Urgent Security Risks in Light of the Latest Red Sea Crisis Developments
Mitigating the security risks associated with the resumption of operations in the Red Sea requires a comprehensive, three-pronged strategy. This strategy must address the threat of attack, sophisticated weaponry assault, and the increased risk of accidents.
#1: Mitigating the Risk of an Attack
Addressing the threat of attack in the Red Sea demands a comprehensive strategy that includes the use of naval escorts and convoys to aid shipments within the region. These naval operations must be optimised to strike a balance between security, timely cargo delivery, and minimising environmental impact.
Obtaining this balance lies in efficiently scheduling escort vessels and optimising ship speeds. One such model has been proposed that considers key factors such as fleet departure times, fleet grouping, and speed adjustments across different voyage segments to enhance efficiency, reduce delays, and to keep fuel costs stable, while also delivering optimal security.
Collaboration between shipping companies and international authorities is also imperative. Stakeholders must reference intelligence from the United Kingdom Maritime Trade Operations (UKMTO) and HREFMARSEC (Maritime Security Centre) to gain updates on attack risk and alerts on emerging threats in the region, to then adjust routes accordingly.
In addition, although AIS is a cornerstone of maritime safety, controlling its broadcast is necessary to protect ships in high-threat zones. Managing AIS transmissions can help protect ships from attackers exploiting the data for malicious purposes. Forgoing IMO Resolutions, Best Management Practices (Version 5), the advice is to apply the following AIS broadcast controls in high-risk areas:
- Regulate Transmission Frequency: Adjusting the frequency of AIS broadcasts based on the level of threat can enhance security.
- Exercise Discretion in Sharing Information: In certain security situations, it may be necessary to limit the information shared. AIS transmissions should be restricted to the ship’s identity, position, course, speed, navigational status and safety-related information only.
- Switch AIS Modes: Vessels may opt to use “silent” mode to reduce their visibility when navigating through high-risk areas. If this mode is used, AIS must be re-activated during an attack. Additionally, the deck log should note when AIS was deactivated and the reasons why.
In addition to these measures, Pole Star Global, in partnership with Ambrey, offers a comprehensive security solution through the Ship Security Alert Service (SSAS), integrated within Pole Star’s Podium platform. The SSAS is designed to deliver real-time alerts on potential security threats, enabling stakeholders to take prompt action and implement necessary precautions.
Through this partnership, Pole Star Global offers cutting-edge technology, strengthened by Ambrey’s Global Operations Centre, ensuring vessels remain compliant, connected, and supported. Ambrey can manage alerts and respond swiftly to incidents.
“This partnership forges a standard focusing on supporting every vessel everywhere” –
Joshua Hutchinson, Managing Director – Intelligence and Risk at Ambrey
Once more, Pole Star Global’s persistent tracking technology removes the risks associated with disrupted AIS signals. Combining this with Ambrey’s global operational expertise provides a unified security ecosystem.
#2: Countering Advanced Weaponry Assaults
As the use of advanced weaponry grows, a strong defence strategy becomes essential. In response, Pole Star Global’s cutting-edge analytics tools, along with AIS and ongoing tracking data, allow shipping companies to monitor nearby vessels and identify potential threats in real time. This continuous security monitoring, enhanced by collaboration between shipping companies and global authorities, plays a crucial role in ensuring a secure and efficient return to operations.
The Red Sea conflict has the potential to escalate into electronic warfare. To counter this, stakeholders must strengthen their cybersecurity efforts. Key requirements include:
- Appointing a Cybersecurity Officer (CySO): Assign a designated expert responsible for overseeing cybersecurity protocols and ensuring that security measures are continuously updated and maintained.
- Establishing Cybersecurity Plans and Assessments: Regularly update and test detailed plans that outline how to respond to potential cyber threats and conduct risk assessments to identify vulnerabilities.
- Implementing Technical Controls: These may include using Multi-Factor Authentication (MFA) to protect access points, enforcing strong password policies, securing devices against intrusions, and ensuring data is encrypted to prevent unauthorised access.
- Conducting Training and Compliance Exercises: Train staff and other stakeholders on cybersecurity best practices and run compliance exercises to ensure everyone is prepared to respond effectively to a cyber incident.
At Pole Star Global, cybersecurity is woven into every aspect of the company’s operations. Committed to exceeding industry regulations and maintaining the highest standards of data protection, Pole Star ensures that all your vessel tracking and operational data remains safe, secure, and readily accessible in one trusted platform.
#3: Reducing the Risk of Accidents:
Pole Star Global provides real-time vessel tracking through AIS and persistent tracking technology, ensuring accurate and up-to-date ship locations.
The failure of this hybrid-tracking approach is extremely unlikely, offering reliable awareness of vessel positions, speeds, and course changes. With this data, operators can make informed decisions to avoid collisions, even in busy waterways. Additionally, Pole Star Global can predict high-traffic areas, enabling operators to adjust routes or departure times to reduce the risk of accidents.
This partnership between Pole Star Global and Ambrey empowers you to take a proactive approach to risk assessment, implementing effective mitigation and management strategies that significantly reduce incidents.
Streamlining Operations in Response to Red Sea Crisis Developments
Despite ongoing uncertainty surrounding the financial impact of the Red Sea’s reopening on freight rates, stakeholders must take proactive steps, applying the precautionary principle to mitigate such financial risks. In this respect, operational optimisation strategies are crucial in addressing both financial and congestion challenges by minimising delays, avoiding congestion hotspots, and consistently following the most efficient and secure routes.
Key Strategies for Managing Financial Risk and Red Sea Congestion:
- Optimise Vessel Scheduling:Coordinate arrival and departure times to reduce port waiting times and alleviate congestion.
- Leverage Advanced Tracking Technology:Utilise AIS and Pole Star Global’s persistent tracking technology for real-time visibility into vessel speed, routes, and estimated time of arrival (ETA). Plus, take advantage of Pole Star Global’s predictive analytics to optimise shipping routes based on real-time congestion data.
- Proactive Voyage Planning with Pole Star Global: Use Pole Star Global’s Podium platform to plan voyages in advance, considering anticipated congestion, potential delays, real-time shipping schedules, port conditions and up-to-date weather forecasts.
- Evaluate Alternative Routes:If congestion in the Red Sea is severe, consider alternative routes such as the Panama Canal or the Cape of Good Hope, using scenario analysis to assess feasibility.
- Build Buffer Time:Allow for extra time in voyage planning to absorb unexpected delays.
- Diversify Logistics Networks: Minimise reliance on a single port or shipping route by exploring alternative options.
- Establish Contingency Plans:Develop backup transportation strategies to address unforeseen disruptions.
- Establish a Homogeneous Fleet:Larger fleets often require more complex scheduling to avoid delays. Maintaining a homogeneous fleet of vessels with similar types and performance characteristics will ensure operations are more predictable, streamlining processes and reducing inefficiencies.
When it comes to managing higher insurance premiums, enforcing stricter security measures, as outlined earlier, can help reduce perceived risk and potentially secure more favourable insurance terms. Additional strategies include:
- Diversifying Shipping Routes: Explore alternative pathways to reduce your reliance on the Red Sea, minimising exposure to high-risk areas.
- Collaborating with Insurance Experts: Consult maritime insurance specialists who can offer tailored guidance and cost-effective strategies.
- Renegotiating Contracts with Freight Forwarders: Given the volatile risk landscape in the region, conduct regular risk assessments to adjust agreements in response to the current climate.
- Testing Crisis Management Plans: Regularly review and update your crisis response strategies to enhance preparedness, which may positively influence insurance negotiations.
Red Sea Crisis: Turning Challenges into Opportunities for Shipping Recovery
While the potential ceasefire in the Red Sea may present challenges, it also provides an opportunity for shipments to resume normal operations, eliminating the need to take the longer, more costly route around Africa via the Cape of Good Hope.
Stakeholders must ensure they are prepared to act swiftly once political stability and ceasefire assurances from the Houthi militant group are confirmed.
By focusing on operational optimisation, strengthening security measures, and maintaining vigilance, shipping companies can successfully navigate the complex risks tied to the reopening of the Red Sea.
Collaboration, advanced tracking technologies, and proactive planning will be essential in addressing both financial and congestion-related challenges.
For more information or to speak with a member of our team about the topics covered in this article, contact us today.