- The closure of the Suez route has impacted the fundamental outlook for container shipping.
- Threats of attacks by Iran-backed Houthi rebels in the Red Sea have forced operators.
- The closure results in longer transit times for supply chains.
The recent closure of the Suez route has significantly impacted the fundamental outlook for container shipping in 2024, leading to potential short-term challenges in Asia, reports Container News.
Shift in Baseline Outlook
According to the January report from the Baltic Exchange, the baseline outlook for 2024, anticipating a cyclical downturn with freight rates bottoming out in late 1Q or early 2Q, has been fundamentally altered. Vespucci Maritime CEO Lars Jensen emphasized the transformative effect of the Suez closure on this previously projected scenario.
Geopolitical Threats and Route Changes
Threats of attacks by Iran-backed Houthi rebels in the Red Sea have forced operators to detour vessels around the Cape of Good Hope. This impacts the Asia-Europe and part of the Asia-US East Coast network, absorbing 5 to 6% of global capacity.
Supply Chain Disruptions and Longer Transit Times
The closure results in longer transit times for supply chains, with Asia-North Europe experiencing delays of 7 to 8 days and Asia-Mediterranean facing delays of 10 to 12 days. Despite these challenges, rates are expected to rise significantly, bringing carriers back to profitability. However, Jensen predicts that rates will peak in the next four weeks before stabilizing at a new level.
Impact on Empty Container Repositioning
The slow repositioning of empty containers, reminiscent of challenges during the COVID-19 pandemic, is expected to recur. Approximately 780,000 TEU of empty containers, fewer than planned, are set to arrive in Asia just prior to Chinese New Year, contributing to the current increase in spot rates.
Freightos Baltic Exchange (FBX) Routes Affected
Kieran Walsh, Commodity Broker at Freight Investor Services, notes the dramatic impact of the crisis on all Freightos Baltic Exchange (FBX) routes. FBX11 (China/East Asia to North Europe) and FBX13 (China/East Asia to the Mediterranean) have seen particularly sharp increases in rates, reflecting the overall market disruption.
Rate Fluctuations
FBX11, as of 8 January 2024, stands at $4,789, significantly higher than its levels on 8 December 2023 ($1,446) and 8 January 2023 ($1,446). Similarly, FBX13, on 8 January 2024, is at $5,202, up from $1,482 on 8 January 2023 and $2,299 on 8 December 2023. The crisis has led to substantial fluctuations in rates across these key shipping routes.
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Source: Container news
