Red Sea Shipping May Resume as Houthis Limit Attacks, Freight Prices Could Drop

DAVOS, Switzerland (AP) — Ships not linked to Israel could begin returning to the Red Sea within two weeks, potentially leading to a significant drop in freight prices, according to DP World‘s deputy chief executive, Yuvraj Narayan. Speaking on the sidelines of the World Economic Forum in Davos, Narayan predicted freight prices could fall by “at least 20%, 25%” over the next two to three months.

The announcement comes after Yemen’s Houthi rebels said Sunday they would limit their attacks to Israeli-linked ships and consider halting all assaults once a Gaza ceasefire is fully implemented. The Iran-backed Houthis have carried out more than 100 attacks on commercial vessels since November 2023, sinking two ships, seizing another, and killing at least four seafarers.

In response to the attacks, major shipping companies have diverted vessels away from the Red Sea, opting for the longer route around the southern tip of Africa. Narayan said this has tied up at least 30% more shipping capacity than usual, driving up costs. “Freight rates are expected to come down once the shorter route via the Red Sea and Suez Canal picks up again,” he added.

The Houthis’ decision to limit attacks follows a fragile ceasefire in Gaza. However, industry experts remain cautious. Jakob P. Larsen, head of maritime security for BIMCO, warned that “even minor deviations from the ceasefire agreements could lead to hostilities,” potentially prompting the Houthis to resume broader attacks.

DP World, a Dubai-based ports and logistics firm, is also exploring expansion opportunities in Africa. Narayan highlighted the continent’s potential, noting the high cost of moving cargo there. “I think there’s massive potential because there’s nothing available … and the cost of moving cargo in Africa is so high that it just makes sense,” he said.

In Europe, DP World is advancing a $1.3 billion investment in London Gateway port despite economic challenges in the UK. The project, initially paused after criticism of DP World’s subsidiary P&O Ferries, is now moving forward after talks with British officials.

The Houthis’ attacks have significantly disrupted global trade, halving traffic through the Red Sea and cutting into revenues for Egypt, which operates the Suez Canal. The U.S. and its allies have conducted over 260 airstrikes targeting the rebels, slowing the pace of attacks in recent weeks. However, the situation remains volatile, with the Houthis warning they could resume broader assaults if necessary.