The Houthis in western Yemen have since October 8, 2023 been firing missiles at Western ships in the Red Sea, hoping to make Israel’s trade route to and from Asia too dangerous to navigate. And Western ships, including those of Israeli-owned ZIM Shipping Lines, have chosen to re-route their ships, which now avoid sailing up the Red Sea and through the Suez Canal to Europe. Instead, they now take the long way round, going down the coast of east Africa, doubling the Cape of Good Hope, and sailing up the coast of West Africa to the Mediterranean. Logically, one might think, that must be a terrible burden on the shipping lines. But in fact, they have seen their profits rise instead, and no shipping line has done as well as Israel’s ZIM.
More on this counter-intuitive result can be found here.
A major Israeli shipping company is experiencing a surge in profits for a surprising reason: Houthi attacks on ships in the Red Sea.
ZIM Integrated Shipping Services, which has been traded on the New York Stock Exchange since 2021, achieved a 48 percent year-over-year revenue increase in the second quarter of this year to $1.93 billion.
And it’s not just revenue that has increased. Its net income rose to $373 million and its carry volume has risen 11 percent.
This all occurred amid rising tensions in the Middle East that began after the Palestinian terrorist group Hamas attacked Israel on Oct. 7, killing 1,200 people and taking another 251 hostage.
Yemen’s Iran-backed Houthi militia, a US-designated terrorist organization, began disrupting global trade with its attacks on shipping in the busy Red Sea corridor after Hamas’s onslaught, arguing its aggression was a show of support for Palestinians in Gaza.
The Houthi rebels — whose slogan is “death to America, death to Israel, curse the Jews, and victory to Islam” — have controlled a significant portion of Yemen’s land along the Red Sea since 2014, when it captured it in the midst of the country’s civil war.
The Iran-backed movement has said it will target all ships heading to Israeli ports, even if they do not pass through the Red Sea, and claimed responsibility for attempted drone and missile strikes targeting Israel. Since Hamas’s massacre across southern Israel on Oct. 7, which launched the ongoing war in Gaza, Houthi terrorists in Yemen have routinely launched ballistic missiles towards Israel’s southern city of Eilat. In July, they hit the center of Tel Aviv with a long-range Iranian-made drone.
Of course, the Houthis are unlikely to successfully attack ships arriving at Israeli ports such as Haifa and Ashdod in the eastern Mediterranean; the threat that it will “target all ships heading to Israeli ports, even if they do not pass through the Red Sea” is mere bravado. Once, however, the Houthis did manage with a drone to hit Tel Aviv, killing one and injuring four. That was a one-off; no Houthi attacks since have hit anywhere in Israel.
The results of the Houthi attacks on shipping in and near the Red Sea are these:
First, retaliatory strikes by the US and the UK have destroyed many Houthi targets, including weapons depots, and missile launchers, as well as killing many Houthi fighters. Particularly devastating was the IDF’s airstrikes on the Yemeni port of Hodeidah, the only port controlled by the Houthis, that destroyed almost all of that port’s oil storage capacity.
Second, the Egyptian government has lost billions from the sharp decline in ships using the Suez Canal. Cairo used to make $10 billion a year from such traffic; now it makes only $5 billion, a colossal drop for a country as poor as Egypt.
Third, the Israeli shipping line ZIM has seen its revenues, and profits, skyrocket. So have other shipping companies, including the Danish-owned Maersk and the German-owned Hapag-Lloyd. But ZIM has performed the best.
This increase in revenues is a result of the fact that the new routes around Africa require much more fuel. The added expense for that fuel is passed onto the consumers, and it turns out that the shipping lines are able not just to pass on the added fuel expense, but also can charge consumers an extra premium. Consumers are in no position to protest or withhold payment. All the re-routed ships are doing the same.
There is also the added risk premium. About 30 ships have been damaged so far by the Houthis; two ships, one Greek-owned and one British-owned, have been sunk. Even though ships have been re-routed round Africa, the Houthis have managed to fire at ships traveling just below the Red Sea and in the Gulf of Aden, at the Bab el-Mandeb strait. The risk remains, and because of that the shipping lines can charge a risk premium to their customers.
Both of these — the fuel premium and the risk premium — have increased both revenues and profits for the major shipping lines. ZIM is among them. This news must enrage the Houthis. It is they who are getting battered, their weapons depots destroyed, their fighters getting killed, their only port severely damaged, and meanwhile, because of the Houthi threats to shipping in the Red Sea, far from harming Israel, the Israeli shipping line ZIM has seen its greatest increase in profits, while it is Arab Egypt that is suffering a colossal drop in Suez revenues. What’s a poor Houthi to do in such sad circumstances, other than dance the bara’a with lots of stomping, shoot his AK-47 into the air while allahu-akbaring, and chew some qat to calm his nerves?
࿗Infidel࿘ says
I understand the part that as a result of using the Cape route instead of the Suez route, the added transportation costs are passed on to consumers. That would increase their revenues, but how does that increase their profits? Customers are still paying more for the same products, and while they may be in no position to complain, how do companies manage to tack even more margins on the transportation?
Also, it would seem that all this would be an incentive for companies to globalize less, and have manufacturing on both ends of these routes. So that if a company has customers in Thailand that’s getting its product from Israel, they might as well manufacture that thing locally in Thailand, and get rid of those costs. And conversely, if that same company happened to manufacture in Thailand but had customers in Israel, they might want to have some manufacturing operations there. I know it means more operational costs in terms of having more manufacturing centers, employing more people, et al, but it certainly cuts down on this transportation, or minimizes it, so that it’s only needed when there are inventory imbalances b/w the 2 locations
Anyway, good for ZIM. In the meantime, I wonder whether Egypt has been forced to drop its rates for the use of the Suez canal. Incidentally, given that they are the most impacted by this disruption of shipping, why have they not been the ones to destroy Houthi facilities?
Frank Anderson says
Infidel, I may be able to explain with a longer true story from my work in San Francisco for the Diablo Canyon Nuclear Plant. A consultant was employed for the rate case, son of rate case and grandson of rate case which added over a billion dollars to the cost of the plant to be included in the rates paid by customers. The consultant lived in Boston but flew home and back every week first class, stayed in the best hotel in town and ate well. His expenses by contract included a 15 percent “bump” or handling premium. The more money he spent, the more money he was paid under the contract. That was not unique. A similar arrangement existed at Waterford 3 in Louisiana, for a while. The contracts were renegotiated to more reasonable terms.
Frank Anderson says
[Additionally,] Did you know that Diablo Canyon was located by the consent of environmental groups at the MOST EXPENSIVE place they could find in the state? What they did not understand was that the more money PG&E spent on the plant, the more profit they would be allowed in the rates. “There is no free lunch.”
somehistory says
“Those blessing you, I will bless; and those cursing you, I will curse.” Gensis 12
EkderlyZionist says
“…why have they (Egypt) not been the ones to destroy Houthi facilities?”
I think for three reasons:
1. Nasser’s Egyptian Army fought in the Yemeni Civil War in the 1960s. They didn’t win. Egyptian historians call that war “Egypt’s Vietnam”. Egypt’s generals don’t want to fight the crazy Zaidi Houthis again.
2. More recently, the Saudi’s and the UAE were fighting the Houthis, until the Obama/Biden administration halted arms shipments to our allies, and tried to bribe and flatter the Houthis into a peace agreement (sound familiar?). Now, no one trusts the United States to support them if they fight the Houthis again. In fact, the United States seems strangely reluctant to do anything to really hurt the Houthis.
3. President Al-Sissi is afraid to do anything that looks like support for Israel, for fear of provoking a revolution by the Jew-hating Egyptian people. Smart man.
So Egypt will take the hit to its Suez Canal revenues, and stay far away from Yemen.
࿗Infidel࿘ says
Thanks for weighing in. Some observations on this:
1. In the 60s, Nasser was waging a proxy war against the Saudis, whereas this time, it would be the Egyptians plus Saudis (who may well bankroll this), and aside from the Houthis, the only opposition would be Iran, who’re not gonna send their own troops there, but maybe Kataeb Hizbullah from Iraq, since Hizbullah itself is largely destroyed
2. Actually, right now, the Saudis have an agreement w/ Iran brokered by the Chicoms, which ensures that neither they nor the Houthis would attack each other. That has freed up the Houthis to assault international shipping. That’s more likely to be the reason that Egypt is not involved, since under such an agreement, the Saudis won’t bankroll Egypt in such a war
3. al-Sisi hasn’t done anything against Hamas, which should convince his people that he’s not in Israel’s pockets (even though it’s in Egypt’s interests to be more pro-Israel than pro-Hamas). But in the case of the Houthis, Egypt is the only country directly financially impacted by lower traffic across the Suez. So they ought to, just for selfish interests alone, take on the Houthis. Not for the sake of any other country, but themselves
somehistory says
“The Israeli Air Force conducted an airstrike on the port of Hodeidah in Yemen on Sunday, two Israeli officials told Axios.
Why it matters: The Israeli officials said the strike was in retaliation for at least two attacks the Houthis launched against Tel Aviv over the past two weeks using long-range ballistic missiles.
The Houthis had threatened to retaliate for Israel’s strike on Hodeidah, Yemen’s fourth-largest city, in July.
Sunday’s attack was the second Israeli strike ever in Yemen and comes as Israel engages in war on several fronts, from Gaza to Lebanon to Yemen.
Driving the news: The Israeli strike on the Red Sea port city was conducted in the early evening local time.
An Israeli official said oil facilities in the port and “sensitive” Houthi facilities in the area were among the targets. Israeli officials said the strike was coordinated with U.S. Central Command (USCENTCOM
It’s unclear if there were any casualties.
Israel Defense Forces confirmed the strike in a statement.”
https://www.msn.com/en-us/news/world/israel-conducts-airstrike-on-yemen-port-israeli-officials/ar-AA1rq0pv?ocid=msedgntp&pc=HCTS&cvid=b64e822644754863bf1763c99833bd59&ei=5
gravenimage says
Unintended Consequences: Houthi Missiles Raise Israeli Shipping Line’s Profits
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Ha ha!
abu taleb says
Why do the west let the Houthis attack ships that transport goods to and from the west? If the west together attack Houthis, it should a matter of weeks to destroy the Houthis completely as the case of Iraq. Most Arab countries will be happy if the Houthis is destroyed because the Houthis is a Shiah organization.
Instead of sending billions to Ukraine to finace the corrupted Zelensky, the west should stop the Houthis to help the economy by making the goods cheaper.
But probably it is not the interest of the western governments to improve their economies.
Brenrod says
I don’t understand: if a nation allowed terrorists to fire missiles at my family that nation would be cinders. Civilians in Tel Aviv were killed therefore civilians in Yemen should pay the price. Same in Gaza to those who support and elected hamas. Any nation who gives sanctuary and support to terrorists are a legitimate target for terror in return: Turkey, Qatar etc.
Frank Anderson says
US criminal law agrees with your analysis IF the DOJ would enforce the law as written. 18 United States Code Section 2, available for free online, says that anyone who “aids, abets, counsels for acts in furtherance” of a federal felony is equally guilty/ Those who conspire to aid the invasion of the US by illegal aliens are guilty of a felony. Those who riot in support of war crimes are committing felonies. War crimes are violations of US law under Article 6 Clause 2 of the US Constitution. See, e.g. United States v. Dawson, 576 F.2d 656 (5th Cir. 1978).
OLD GUY says
Totally agree, if you support or harbor terrorist you should be considered fair game.