Trendwatch: Red Sea impasse remains despite creation of international naval coalition; Shipping industry in the dark over US-led Red Sea navy force; EU and US pause steel tariff war until after elections

This is our wrap-up for 2023. We look forward to sharing the latest news in our industry with you again next year.

Red Sea impasse remains despite creation of international naval coalition

The global shipping industry has welcomed news of a US-led naval coalition to ease tensions in the Red Sea, but is wary that it will take weeks before the area is safe to transit.

The US and a coalition of 10 countries, including the UK, France and Canada, have formed a naval security initiative called Operation Prosperity Guardian to defend ship navigation in the Red Sea region where many oil majors, containerlines, and bulk owners have decided to halt transits in recent days following a series of attacks by Iranian-backed Houthis off Yemen, aimed primarily at Israeli-linked vessels.

Despite the official launch of the initiative on Monday evening, ships continue to migrate to alternative routes, suggesting many big names in merchant shipping are still not prepared to run the security gauntlet through the southern Red Sea.

Shipping industry in the dark over US-led Red Sea navy force

Shipping companies remain in the dark over a new international navy coalition being assembled by the United States to combat attacks in the Red Sea, with many vessels continuing to avoid the area or cancelling contracts, sources said on Wednesday.

The sources, who include shipping and maritime security officials, say few practical details are known about the initiative launched on Tuesday by Washington or whether it will directly engage in the event of further armed attacks at sea.

Iran-backed Houthi militants in Yemen have since Nov. 19 stepped up attacks on vessels in the Red Sea to show support for Hamas as Israel's military offensive in Gaza continues. The group has vowed to continue operations targeting Israeli ships or vessels headed to Israeli ports.

Well-trained Houthi fighters with growing capabilities to launch night attacks have fired missiles and launched seaborne assaults on ships from fast boats. Missiles fired have been repelled by U.S. warships.

EU and US pause steel tariff war until after elections

The European Union and the US will extend a truce on steel and aluminum imports, avoiding a possible return of billions of dollars in tariffs on transatlantic commerce.

The European Commission, the EU executive’s arm, announced on Tuesday it will suspend retaliatory measures implemented during the Trump presidency for 15 months, until March 31, 2025. Brussels, however, did not convince Washington to improve its current tariff-rate quotas, or TRQs, above which duties are applied.

The extension will result in EU steel and aluminum exporters saving approximately €1.5 billion ($1.6 billion) in tariffs annually, according to a commission statement. The US has to complete its own procedure to extend its TRQ system for the same period as from January.

U.S. semiconductor manufacturing bill makes it through Senate

A bill brought by U.S. Senators Rick Scott (R-Fla.) and Gary Peters (D-Mich.) aimed at expanding the country’s domestic semiconductor manufacturing capabilities recently made it through the Senate without opposition.

According to Florida Daily, the bill, dubbed the Securing Semiconductor Supply Chains Act, would allow the U.S. Department of Commerce’s SelectUSA program to develop new strategies to attract foreign investment to the U.S. semiconductor manufacturing sector.

The bill was first brought about by Senator Peters in 2021 with Scott as a co-sponsor, then brought back earlier this year, with Scott again co-sponsoring it.

Railroads urge border officials to reopen U.S.-Mexico crossings

Railroads are calling for U.S. Customs and Border Protection (CBP) to reopen U.S.-Mexico rail crossings at El Paso and Eagle Pass, Texas.

The CBP temporarily closed the crossings on the morning of December 18, and is moving more personnel to the areas after “observing a recent resurgence of smuggling organizations moving migrants through Mexico via freight trains,” according to a CBP statement on December 17.

“The urgency of reopening these crossings and restoring rail service between the two nations cannot be overstated,” Ian Jefferies, president of the Association of America Railroads, said in a statement.

UK to introduce climate levy on steel imports starting 2027

The UK will introduce a carbon border tax in 2027 for imports of emissions-intensive goods from countries deemed to have weaker climate rules, following a similar move by the European Union.

Imports of iron, steel, aluminum, ceramics and cement will be subject to the levy, the Treasury said in a statement on Monday. The tax applied will depend on the amount of carbon emitted in production and the gap between the carbon price in the UK and the country of origin.

“This levy will make sure carbon-intensive products from overseas — like steel and ceramics — face a comparable carbon price to those produced in the UK, so that our decarbonization efforts translate into reductions in global emissions,” Chancellor of the Exchequer Jeremy Hunt said in the statement. “This should give UK industry the confidence to invest in decarbonization.”