Israeli ships forced to reroute amid spiralling costs as Houthi threat intensifies

There are increasing worries in Israel's shipping sector over the damages being inflicted by Yemen's Houthi  rebels, who have targeted and seized Israel-linked ships in the Red Sea.

The increasing threat has forced Israeli shipping companies to reroute their cargo ships, raising transportation costs significantly.

There are fears that Israel's import and export sector could lose major markets, as well as the cargo aboard detained ships.

The Houthis have made increasing threats against Israeli or Israel-linked ships in response to Israel's ferocious and indiscriminate assault on the Gaza Strip, which followed Hamas's attack on 7 October. In recent weeks, a number of ships have been targeted.

The most recent incident was on Sunday, when merchant vessel Central Park, was attacked in the waters between Yemen and Somalia.

The tanker was managed by Zodiac Maritime Ltd, which is part of Israeli billionaire Eyal Ofer's Zodiac Group, and was transporting chemicals for use in fertilisers to buyers in Asia. Hours later a US defence official announced the ship was safe after US intervention.

Since then, it has emerged that the vessel may have been hijacked by Somali pirates rather than the Houthis, but this has not yet been confirmed.

However, the incident shone a light on the escalating tensions in one of the busiest shipping lanes in the world.

On 19 November, Houthi militants seized car-carrier Galaxy Leader in the Red Sea, and are still holding it.

On 23 November, a merchant ship owned by an Israeli businessman was attacked in the Indian Ocean by a suspected Iranian-made Shahed 136 drone, according to a US defence official.

The Ambrey Maritime Security Company reported that the ship, which was flying a Maltese flag, and was French-operated, suffered damage when the drone exploded near it.

Although Israel-linked ships are turning off their tracking systems as they pass through the Red Sea and approach the Gulf of Aden and Indian Ocean through the strategic Bab al-Mandeb strait - for fear of being hijacked or attacked by the Houthis - this has not prevented them being targeted.

Ships have been forced to reroute, and make detours around Africa to the Mediterranean Sea, significantly increasing shipping duration and transportation costs.

According to data published by Freightos, an Israeli shipping tracking company, shipping costs from China to the Israeli port of Ashdod increased by 9 -14 percent in the last two weeks of October.

The rise in costs deviates from the general trend in shipping costs between Asia and Mediterranean countries, which fell by 7 percent in the same period and by 8 percent since 7 October.

Judah Levine, head of research at Freightos said to the Israeli newspaper Globes on Monday that the rise in freight costs between Israeli ports and China following the outbreak of war "is already affecting all goods reaching Israel from China, the prices of which have started to rise in the past few weeks."

Levine pointed out that the Mediterranean Shipping Company (MSC) had reported congestion at Israel's Ashdod port due to increased security checks and labour shortages as a result of the war.

The Houthis' newfound ability to target ships in the Red Sea is a striking example of the blowback of Yemen's war

Will Houthi-Israel tensions threaten Red Sea security? ⬇️https://t.co/juDiIiVdiZ

— The New Arab (@The_NewArab) November 22, 2023

He said shipping lines were increasingly avoiding passing through the Bab al-Mandeb Strait near Yemen when they sail from Asia towards Israel to avoid being attacked. In addition, some ships sailing from Israel to China had turned around after crossing the Suez Canal, after the Houthis seized Galaxy Leader.

"Israeli, or partly-Israeli, ships are reinforcing the security teams that they carry, which adds to costs” he said, adding that Zim, an Israeli liner operator, had announced it was raising the risk premium on each container by over $100, leading to higher shipping prices on international shipping lanes leading to Israeli ports."

If the risks in the Bab al-Mandeb Strait persist, the alternative for Israel may be air or land transportation. This would mean higher costs, dealing a blow to Israel's foreign trade.

According to data from the World Bank, Israel's merchandise trade made up 34.6 percent of its GDP in 2022, and amounted to around $522 billion. Israeli merchandise exports totalled about $73.8 billion, while imports totalled $107.2 billion.

Annually 10 percent of international maritime trade passes through the Bab el-Mandeb Strait which Yemen overlooks.