July 23, 2024
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Oil tanker group Frontline unlikely to return to Red Sea ‘anytime soon’

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Shipping tycoon John Fredriksen’s Frontline Management has warned that shipowners are unlikely to return to the Red Sea “anytime soon”, despite hopes that a UN proposal for a ceasefire in Gaza could help end attacks on vessels in the region.

The oil tanker group’s chief executive Lars Barstad said on Wednesday that any ceasefire in Gaza would not immediately restore shipping through the Red Sea, a vital trade route where Houthi militants have been launching missiles at ships in a show of support for Gaza.

“We all want ceasefire between Hamas and Israel, but to expect owners to put their seafarers at risk passing Red Sea or Gulf of Aden anytime soon is a bit naive,” Barstad wrote on X.

“There is no evidence the Houthis will stop if a ceasefire is agreed,” he added in comments to the Financial Times, pointing to reports of attacks on a cargo ship yesterday.

Barstad’s comments are the latest warning from the industry that global shipping routes are unlikely to return to normal for some time, prolonging supply chain disruption.

As well as potentially putting crews at risk, a return to normal trade through the Red Sea could affect the profits of shipowners.

Frontline reported its best full-year result in 15 years in February, with Barstad saying that the disruption in the Red Sea was causing “(other) trading lanes to widen” and offered “economies of scale as oil and products move around the Cape of Good Hope”.

Shares in Frontline and its competitors have jumped since the Houthis started targeting ships in November. Ships were forced to switch routes to Africa’s Cape of Good Hope and prices have risen in tandem with sailing times.

But shares in leading container ship owners AP Møller-Maersk and Hapag-Lloyd have both fallen by 6 per cent since Monday, when the UN Security Council passed a resolution backing US President Joe Biden’s plan for a ceasefire between Israel and Hamas in Gaza.

Shares in Frontline, which is part of Cypriot billionaire Fredriksen’s shipping empire, were flat.

Barstad told the FT that “any ceasefire will be fragile” and Frontline “would not want to have employees” passing through the Red Sea if fighting resumes.

He added: “The risks associated (with) this conflict (are) still very high.”

Dimitris Maniatis, chief executive of shipping security provider and consultancy Marisks, said: “it is obvious to everybody that (the Houthis) are not going to stop.”

He added: “They understand the significance their actions have over the global economy . . . They understand what they have achieved in regards to recognition is more than they have managed before.”

This article has been amended to clarify the title of Dimitris Maniatis.

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