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Red Sea previously a key global gateway for consumer goods

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Altered trade routes add extra days and costs for

shipments

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War risk insurers maintain firm rates for now - sources

say

By Jonathan Saul and Helen Reid

LONDON, Jan 17 (Reuters) - Companies transporting their

products around the world are not ready to return to the Red Sea

trade route in the wake of a Gaza ceasefire deal because of

uncertainty over whether Yemen's Houthis will continue to attack

shipping, industry executives said.

The leader of Yemen's Houthis said on Thursday that the

Iran-aligned group would monitor the implementation of a

ceasefire deal between Israel and Hamas aimed at ending the war

in Gaza and continue its attacks on vessels or Israel if it is

breached.

The Houthi militia has carried out more than 100 attacks on

ships since November 2023 and has sunk two vessels, seized

another and killed at least four seafarers in what they say is

solidarity with Palestinians in Gaza.

The intensity of the attacks has disrupted global shipping

and prompted route changes.

Executives from shipping, insurance and retail industries

told Reuters the risks remained too high to resume voyages

through the Bab al-Mandab strait in the Red Sea through which

exports to Western markets from the Gulf and Asia must pass

before entering the Suez Canal.

"There is no way I'm putting any of my merchandise on a boat

that's going to go through the Red Sea for some time to come,"

said Jay Foreman, CEO of U.S.-based Basic Fun, which supplies

toys to major U.S. retailers like Walmart and Amazon.com.

"I'll spend the extra money, and I'll send everything around

the tip of Africa... It's just not worth taking a chance."

TRIAL RUNS

Matt Castle, vice president of global forwarding with

logistics group C.H. Robinson, said: "It's not likely the

industry will see a large shift back to the Suez Canal in the

short term."

He said this was due to the challenges related to securing

cargo insurance given perceived high risks and time constraints,

as it would take weeks or months to implement a new ocean

shipping plan.

If the Houthis do halt the attacks, retailers may have to

wait until the second quarter for shipping lines to fully shift

their routes, said Craig Poole, managing director at Cardinal

Global Logistics, whose clients include B&M Retail and Pets At

Home.

"It'll definitely be a case of trialing the route, making

sure that the ceasefire is genuine."

Maritime security sources said companies would treat any

pledge by the Houthis to halt attacks with caution and would opt

for test voyages to assess the risk environment.

For larger ships, such as tankers carrying liquefied natural

gas, any resumption would take longer due to bigger risks if

such a ship carrying a flammable cargo was hit.

Norwegian shipper Wallenius Wilhelmsen, which transports

vehicles by ship, said it would not resume sailing through the

Red Sea "until it is safe".

Swedish fashion retailer H&M, which uses sea

freight to transport most of its products from factories in Asia

to Europe, said it was monitoring the situation.

Tailwind Shipping Lines, a shipping firm owned by German

supermarket chain Lidl, said the security of crew, ships and

cargo was a top priority.

The European Union's naval force in the Red Sea said its

"threat assessment remains unchanged".

WAR RISK

Higher war risk insurance premiums, paid when vessels sail

through the Red Sea, have meant additional costs of hundreds of

thousands of dollars for a seven-day voyage for any ships still

sailing through the area.

Insurance sources said on Friday that additional war risk

premiums were quoted between 0.6% and up to 2% of the value of

the vessel if a ship had any links to Israel or the U.S. and

were broadly unchanged in recent months.