The Wire - December 15, 2023

RR The Wire 1830Z December 15, 2023

PRECEDENCE: ROUTINE RR

DTG: 183015Z DEC 23

ICOD: 173015Z DEC 23

CONTROLS: Public Release

QQQQ

BLUF: MAERSK SUSPENDS OPERATIONS IN RED SEA DUE TO SECURITY THREATS.

 -----BEGIN TEARLINE-----

-International Events-

Red Sea/HOA: Yemeni forces hijack the M/V RUEN. Yemeni forces attempted to hijack the M/V ARDMORE ENCOUNTER, which was unsuccessful. After boarders were repelled from this vessel, Yemeni forces launched and struck the vessel with two ASCMs. The USS MASON (DDG 57) was also recently targeted again by kamikaze drones. A plethora of US Navy vessels have come under numerous attacks over the past few weeks as well.

In response to these events, the Danish shipping company Maersk has announced a pause of all shipping operations in the Red Sea. Maersk is the largest shipping company in the world, and accounts for about 15% of all global trade. Hapag-Lloyd has also made a similar announcement regarding the cessation of operations in the Red Sea for now. AC: This is a very serious event that will likely have direct and immediate consequences for most international trade…though perhaps not in the ways one might expect.

Company representatives have specifically stated that their ships are also not transiting around the continent of Africa, the only other feasible route for Eurasian trade. Though details are sketchy at best, this may suggest a global bottleneck of trade. Maersk may also have inside knowledge of other factors that would make the weeks-long trip around the Cape of Good Hope not the best option. Though somewhat of an analytical leap, the “pause” (rather than immediately shifting to the longer route around Africa) suggests that at least Maersk believes that the issues of targeting and piracy will be short lived.

-Analyst Comments-

The recent targeting of international shipping in the Red Sea highlights the problems within a seemingly unrelated factor…economics. Even just a couple of years ago, a simple shipping accident caused global strife in the Suez Canal. The incident involving the M/V EVER GIVEN resulted in the international shipping community being thrown into chaos for a few days. International financial markets were also affected immediately, taking a downturn mere hours after an event occurred; an event that we knew at the time was not terrorism-related.

Within the past few weeks, OPEC has announced substantial production cuts. A petroleum war is on the brink in South America. Multiple ships have been struck with drones and cruise missiles in the Red Sea. There is a hot war in the Holy Land….and all financial markets reach record highs. Any one of these events just a couple of years ago would have resulted in the global financial sector taking massive (albeit probably temporary) hits. One of the largest shipping companies in the world announces a pause in operations, in an area that handles 10% of all trade on Earth…and the effect on global finance is barely noticeable (as of the writing of this report). Even Maersk’s own stock didn’t have the slightest perceivable dip upon the announcement of this “pause”. No economic expertise is needed to perceive that the substantial events of the past few weeks having little to no effect on the pulse of global finance probably means that economic data is no longer representative of the severity of the situation.

-----END TEARLINE-----

Analyst: S2A

END REPORT

NNNN