Container Carriers: Surging Revenue Amid Cape Diversions

• Extended voyages via the Cape of Good Hope amid disruptions contribute to increased emissions, yet carriers enjoy disproportionate revenue gains, says cargo research specialist MSI.
• The Shanghai-Rotterdam World Container Index has surged from $1,442/feu in mid-December to $3,577 recently, with a risk premium due to uncertainty.
• Analysts question the justification for added costs linked to Cape diversions, urging stakeholders to carefully assess surcharges.

Revenue Surge Amidst Longer Voyages

The Cape of Good Hope route, chosen for longer voyages due to disruptions, is leading to increased fuel consumption and carbon emissions. Despite these challenges, cargo research specialist MSI notes carriers are enjoying “disproportionate revenue increases.” The World Container Index (WCI) on Shanghai-Rotterdam has witnessed substantial hikes, from $1,442/feu in mid-December to $3,577 recently.

Uncertainty Costs and Risk Premium

MSI’s container market analyst, Daniel Richards, suggests that current rate increases may be driven by shippers paying for uncertainty. However, he anticipates rates normalizing if Cape transits become a longer-term norm. Richards notes a risk premium element, with stakeholders seeking assurance before the Chinese New Year to secure space and equipment, potentially inflating costs in the short term.

Inconsistencies in Environmental Regulations

MSI’s findings highlight inconsistencies in the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) regulation, in force since January 1. While vessels traveling around the Cape score better on CII due to more time at sea, they burn 21.5% more fuel and emit more carbon than those using the Suez Canal. The EU Emissions Trading System (ETS) adds a €75,000 ($82,000) levy for a 15,000 TEU box ship transiting the Cape, raising questions about the justification for additional costs associated with Cape diversions.

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Source: The Loadstar

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