Many big shipping companies will double pay for crew sailing through the now-perilous Red Sea

Many big shipping companies will double pay for crew sailing through the now-perilous Red Sea
BYChristian Wienberg and Bloomberg December 30, 2023 https://fortune.com/2023/12/29/shipping-companies-hazard-pay-red-sea-sue...

The shipping industry in Denmark, home to some of the world’s largest firms, agreed to double wages for crew sailing through the Red Sea to compensate for the danger posed by the recent attacks.

The hazard pay kicks in for the time spent in two defined high-risk areas in the region, according to a deal presented on Friday by employer group Danish Shipping and the nation’s three largest labor unions for seafarers.

Many transport companies are avoiding the Red Sea where Yemen-based Houthis have attacked ships in support for Hamas in the conflict with Israel. But even ships without direct links to Israel have been targeted, and as the escalation of the war threatens global trade, a US-led task force is trying to bolster security on the key waterway.

Denmark’s A.P. Moller-Maersk A/S, the world’s second-largest container line, is one of the companies preparing to resume shipping through the Red Sea after initially sailing the long way south of Africa. Others are taking a more cautious approach: shipping giant Hapag-Lloyd AG confirmed on Friday it will continue to avoid the Red Sea and will review the decision on Jan. 2.

Data this week showed that half of the container-ship fleet that regularly transits the Red Sea and Suez Canal is avoiding the route. Diverting around Africa can take as much as 25% longer than using the Suez Canal shortcut between Asia and Europe, adding to costs that may ultimately be passed on to consumers. And it comes just as the other major trade shortcut, the Panama Canal, is suffering from drought, adding to the potential economic risks.

Denmark’s government said on Friday the Nordic country will send a warship to the Red Sea to participate in the US-led mission. The vessel, which will be of the frigate class, is expected to arrive in the area at the end of next month, according to a statement from the ministry of defense in Copenhagen.