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Since the outbreak of the new round of Israeli-Palestinian conflict, the Houthi rebels in Yemen have frequently launched missile and drone attacks on Israel under the pretext of “supporting Palestine,” and have also repeatedly attacked ships “affiliated with Israel” in the Red Sea. A large portion of the EU’s trade with Asia passes through the Red Sea and the Suez Canal. To avoid this treacherous waterway, many international shipping companies have announced the suspension of their Red Sea routes, rerouting them via the distant Cape of Good Hope in Africa, severely impacting the stability of global supply chains and the timeliness of cross-border logistics. Since the beginning of 2024, the Red Sea crisis has intensified. Merchant ships in the Red Sea are frequently attacked. Yemeni Houthi spokesman Yahya Sarreya issued a statement on February 19, saying that the Houthis fired multiple missiles at two US ships sailing in the Gulf of Aden that day, “accurately hitting their targets.” Sarreya said the attacked ships were named the “Sea Champion” and the “Navis Fortuna.” Public shipping records show that the “Sea Champion” is a bulk carrier flying the Greek flag, and the “Navis Fortuna” is a bulk carrier flying the Marshall Islands flag. Shortly before the Houthi rebels issued their statement, the UK’s Office for Maritime Trade Operations reported an attack on a cargo ship in the Gulf of Aden. The office said a merchant vessel sailing in the Gulf of Aden was attacked by two missiles on February 19, causing minor damage to the hull. Shrapnel from the explosions landed on the ship’s deck, but there were no injuries. The office did not disclose the name of the attacked vessel. This marks the second time in 24 hours that the Houthi rebels have announced attacks on vessels sailing in the Gulf of Aden. Earlier that day, Sarreya said the Houthis had carried out a missile strike on a British cargo ship sailing in the Gulf of Aden, successfully hitting its target. The attacked ship, named “Rubimar,” is a Belize-flagged general cargo vessel registered in the UK. Attacks on multiple cargo ships in the Red Sea and surrounding waters have fueled tensions, driving up war risk premiums and increasing sailing costs as many ships detour to avoid the danger. According to the Financial Times, the London insurance market has designated the southern Red Sea as a high-risk area. Merchant ships transiting this region must inform insurers in advance and purchase additional war risk insurance. However, avoiding the Suez Canal and circumnavigating the Cape of Good Hope at the southwestern tip of Africa means increased sailing costs, longer transit times, and delayed delivery times, significantly raising shipping costs. Saunders, a senior economic advisor at Oxford Economics, stated that global ocean freight rates have risen by approximately 200% since mid-November 2023, with ocean freight rates from Asia to Europe increasing by about 300%. He added that if costs remain high, they will significantly increase certain measures of inflation over the next year or so. Crisis Impacts Global Trade The Suez Canal is a crucial waterway for global trade, particularly for container trade. It handles 12% to 15% of global maritime trade, including approximately 20% of container trade. Disruption to this vital hub would have catastrophic ripple effects on global trade and supply chains. Dutch Trade Minister Geoffrey van Leven recently stated that shipping costs on the Shanghai-Rotterdam route via the Suez Canal have “in some cases increased by 200%” since the Houthi attacks on Red Sea merchant ships in Yemen. A recent report from Morgan Stanley indicates that container freight rates on the Asia-Europe route have surged by 236% due to shipping companies detouring around the Cape of Good Hope in Africa. Data released by the United Nations Conference on Trade and Development (UNCTAD) on January 26 shows that trade volume through the Suez Canal has fallen by 42% in the past two months due to the Red Sea crisis, with significant declines also observed in oil tanker and natural gas transport. UNCTAD warns that the Red Sea crisis, the Russia-Ukraine conflict, and the Panama Canal drought are disrupting global trade. The transportation research team at China Merchants Securities pointed out that if waterways are blocked, relevant vessels may have to detour, leading to longer transport distances and reduced transport efficiency. If they detour around the Cape of Good Hope, the voyage will increase by more than 8,000 nautical miles (approximately two weeks), which will affect the efficiency of cargo transportation. At the same time, regional tensions will increase the war risk surcharges on relevant routes. The Red Sea crisis, with no immediate solution in sight, is putting pressure on international trade, making action seem urgent. As tensions in the Red Sea continue, on February 19th, foreign ministers from EU member states met in Brussels and officially launched a Red Sea escort operation. This operation is planned to last one year and can be extended. Currently, Belgium, Italy, Germany, France, and other countries plan to send multiple warships to the Red Sea region. This also means that after a period of communication and coordination, the EU has finally decided to launch Operation Shield, whose mission includes deploying European warships and airborne early warning systems to protect cargo ships in the Red Sea, the Gulf of Aden, and surrounding waters. The German frigate Hesse departed for the Mediterranean on February 8th. Belgium plans to send a frigate to the Mediterranean on March 27th. According to the plan, the EU fleet will be able to fire to protect merchant ships or in self-defense, but will not proactively attack Houthi positions in Yemen. Orders for China-Europe freight trains have increased significantly. Frequent attacks on merchant ships in the Red Sea have disrupted shipping, caused ocean freight rates to soar, and significantly extended transit times, leading some companies to turn their attention back to the China-Europe Railway Express. The China-Europe Railway Express is an international container rail freight service connecting China with Europe and countries along the Belt and Road Initiative, operating along three routes: west, east, and central. Currently, the China-Europe Railway Express reaches 217 cities in 25 European countries, with over 17,000 trains operating in 2023, transporting over 1.73 million TEUs of cargo. Following the Red Sea crisis, demand for freight via the China-Europe Railway Express has increased by 100%. Currently, approximately 30% of the overall capacity of the China-Europe Railway Express is used for shipments to Europe, an increase of 18 percentage points compared to before the Red Sea crisis. Data from Freightos, an international freight booking and payment platform, shows that China-Europe freight train slots were fully booked in January, indicating that more shippers are choosing rail as an alternative transportation option. In January, the Zhejiang-Europe freight train service operated 110 trains, transporting 12,000 TEUs of cargo, a year-on-year increase of 26.8%. On January 16, the Guangdong-Europe freight train (towards Germany) resumed its journey after a two-year hiatus. According to data from China Railway Container Transport Corporation, the total number of domestic and international shared container yards for China-Europe freight trains has now exceeded 200, forming a shared container yard network covering the main nodes of the China-Europe freight train service. Reprinted from China Financial News Network MSC officially replaces Maersk as the world’s largest shipping company Starting March 1st, several international shipping companies, including Maersk, adjusted their Peak Season Surcharge (PSS) rates.