By Joe Stonor
Shares in A.P. Moller-Maersk and Hapag-Lloyd fell after the companies said a joint service will begin traversing the Red Sea again as security concerns ease, a likely boost to supply that could hit the freight fees charged by the shipping firms.
In a joint statement, the Danish and German maritime giants said that ships following the AE15 service connecting Asia and the Mediterranean would no longer take a detour via the Cape of Good Hope on the southern tip of Africa. Instead, ships will sail the shorter trans-Suez route connecting the Red Sea to the Mediterranean.
The two companies jointly operate the AE15 service under their Gemini partnership.
Transiting the Red Sea will lead to faster, more sustainable and more efficient transport between Europe and Asia, the companies said. Investors responded negatively, betting that the shorter route will ease capacity constraints and in turn lower shipping rates.
Shares in both companies fell following the announcement. Maersk lost 5.45% to trade at 15,790 Danish kroner in afternoon European trade, while Hapag-Lloyd shares fell by 2.7% to 114.3 euros.
Forced diversions, exacerbated this year by conflict in the Persian Gulf, are to the benefit of global shippers, Morningstar equity analyst Ben Slupecki wrote in a note earlier this year.
"The artificial reduction in supply increases freight rates and margins," he said.
The two shipping majors stopped their ships entering the Bab el-Mandeb Strait in the south of the Red Sea in December 2023 following attacks. Iran-backed Houthi rebels, operating from Yemen, have repeatedly targeted commercial cargo, forcing ships to take the long way round Africa.
"Maersk and Hapag-Lloyd will continue to monitor the security situation in the Middle East region very closely," the companies said.
The rerouting is dependent on "the ongoing stability in the Red Sea area and the absence of any escalation in conflicts in the region," they said.
Maersk added that it isn't currently considering routing its broader east-west network back through the Red Sea.
Write to Joe Stonor at josephmichael.stonor@wsj.com