Europe's two major shipping giants announce suspension of major Middle East routes; the US announces $20 billion plan to "ensure vessel passage"

Recently, due to ongoing conflicts in the US, Israel, and Iran, Iran has announced a ban on US, Israeli, and European ships passing through the Strait of Hormuz, causing many oil tankers, cargo ships, and other vessels to remain stranded in the Persian Gulf.

According to Liberation Daily, on March 5 Beijing time, a bulk carrier with the signal “China All” (China Owner), the “Iron Maiden,” successfully passed through the Strait of Hormuz along the Oman coast. Information shows that the operator of the “Iron Maiden” is Cetus Maritime, also known as Xinda Shipping (Shanghai) Co., Ltd. Its CEO Yang Xintian stated that they are not responding to questions about the “Iron Maiden” at this time and will disclose specific details to the media and the public later.

Two Major European Shipping Giants

Decide to Suspend Major Middle Eastern Routes

According to CCTV Finance, citing The Wall Street Journal on the 6th, Danish shipping company Maersk and German shipping company Hapag-Lloyd announced that, due to escalating regional conflicts threatening safe navigation, they will suspend several major Middle Eastern routes.

On the 6th, Maersk stated that based on the latest risk assessments and operational reviews, considering the escalation of conflicts in the Gulf region affecting navigation safety, they will suspend routes connecting the Middle East with Europe and the Far East, as well as shuttle routes within the Gulf. On the same day, Hapag-Lloyd also announced the suspension of multiple Middle Eastern routes, including Oman Gulf shuttle services and routes connecting Asia with the Persian Gulf, India, the Middle East, and the Mediterranean. Hapag-Lloyd also said they will introduce new services to ensure operational stability but have not disclosed specific details.

Shipping experts believe that this broad suspension will directly impact freight flow between Asia, Europe, and the Middle East, and also increase the risk of disruption to Middle Eastern trade corridors.

Niels Rasmussen, Chief Shipping Analyst at the Baltic and International Maritime Council: In the short to medium term, we expect container port congestion to worsen. Container ships heading to the Persian Gulf may have to unload at other nearby ports, leading to longer docking times, increased port vessel density, and greater congestion.

Experts also pointed out that many container shipping companies have fully suspended shipping services in the Strait of Hormuz and surrounding areas. This not only directly affects company revenues but also leads to higher freight rates and supply chain delays, which will impact downstream manufacturing and consumer goods industries, increasing inflationary pressures.

John Stoopert, Chief Maritime Director of the International Maritime Organization: The 5th is the expiration date for many insurance policies, and most have likely been renegotiated at higher rates. We are now in an environment where insurance costs are rising across the board, not only in the Persian Gulf and Oman Gulf but also extending southward into the Indian Ocean. This could cause a chain reaction in shipping and indirectly push up consumer goods prices.

US Announces $20 Billion Reinsurance Plan

To Ensure Passage Through the Strait of Hormuz

As conflicts in the Middle East escalate, insurance costs for ships passing through the Strait of Hormuz and surrounding waters have risen sharply. On the 6th, the US government announced a reinsurance plan to protect ships such as oil tankers.

On the 6th, the US government announced a maritime reinsurance program for Gulf shipping, with the US International Development Finance Corporation providing up to $20 billion in coverage for losses, focusing on risks including war insurance. This move aims to ensure the continued transportation of key supplies like oil, gasoline, and liquefied natural gas through the Strait of Hormuz to global markets.

Reinsurance is insurance for insurance companies. Amid tense Middle Eastern tensions, war risk insurance premiums in the Gulf region have soared. For example, the war insurance rate for a tanker valued between $200 million and $300 million has risen from about 0.25% (around $625,000) before the conflict to 3% (about $7.5 million), an increase of over ten times. Several commercial insurers have canceled war risk coverage for ships in the Persian Gulf and nearby waters. The surge in premiums raises transportation costs, and without insurance, the risks of shipping increase, causing many vessels to remain near the Strait of Hormuz.

JPMorgan estimates that the insurance needed for tankers traveling in this region could exceed $300 billion, far surpassing the $20 billion announced by the US. Some analysts believe that insurance is not the main issue facing shipowners; rather, their primary concern is safety, which is why many choose not to pass through the Strait of Hormuz.

(Source: Daily Economic News)