Red Sea Shipping Disruption Sparks Surge In Container Rates

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Container shipping rates on key global trade routes have experienced a significant surge this week, driven by concerns of a prolonged disruption to global trade in the Red Sea following US and UK airstrikes on Yemen. The Red Sea is one of the world’s busiest shipping routes, and the fear of disruptions has led to heightened shipping costs and concerns about potential impacts on global supply chains, says an article published on the arab weekly website.

Summary

  • US and British military actions against Iran-backed Houthi forces in Yemen have prompted concerns about the safety of shipping routes, leading to the avoidance of the nearby Suez Canal.
  • The benchmark Shanghai Containerised Freight Index has surged over 16% week-on-week to 2,206 points, reflecting non-contract “spot” rates for container shipments from China’s ports.
  • Rates on the Shanghai-Europe route have risen 8.1% to $3,103 per 20-foot container, while rates for containers to the unaffected US West Coast have soared by 43.2% to $3,974 per 40-foot container week-on-week.
  • Major players in the ocean shipping industry are bracing for months of upheaval and increased costs due to the redirection of ships around Africa’s Cape of Good Hope.
  • The disruption has led to changes in shipping routes for major container ship owners like Maersk and Hapag-Lloyd, affecting the availability of vessel space and contributing to rising rates.

Military Strikes And Shipping Warnings

US and British military actions against Iran-backed Houthi forces in Yemen have prompted concerns about the safety of shipping routes, leading to the avoidance of the nearby Suez Canal—a vital shortcut handling 12% of global trade. The US and UK militaries have advised all ships to steer clear of the conflict zone, raising fears of disruptions to trade routes and potential inflation risks.

Shanghai Containerised Freight Index Surges

The benchmark Shanghai Containerised Freight Index has surged over 16% week-on-week to 2,206 points, reflecting non-contract “spot” rates for container shipments from China’s ports. The index has seen a remarkable 114% increase since mid-December, indicating the severity of the current shipping situation.

Route-specific Rate Increases

Rates on the Shanghai-Europe route have risen 8.1% to $3,103 per 20-foot container, while rates for containers to the unaffected US West Coast have soared by 43.2% to $3,974 per 40-foot container week-on-week. These route-specific increases underscore the disruptions and shifting dynamics in global shipping.

Anticipation Of Months Of Upheaval

Major players in the ocean shipping industry, responsible for handling over 90% of global trade, are bracing for months of upheaval and increased costs. The redirection of ships around Africa’s Cape of Good Hope, due to concerns about the Red Sea, has led to delays, increased fuel costs, and added complexities to vessel schedules.

Impact On Various Sectors

The disruption has led to changes in shipping routes for major container ship owners like Maersk and Hapag-Lloyd, affecting the availability of vessel space and contributing to rising rates. Oil tankers have adjusted their routes, dry bulk remains less affected, and major importers such as Tesla, Geely-owned Volvo Car, and Ikea have reported product shortages or warned of delayed shipments.

Rising Costs And Spot Market Dynamics

Rerouting ships around Africa increases voyage times and fuel costs, and carriers are responding with surcharges and adjustments in space allocation. The impact extends beyond specific routes, affecting Transpacific and North-South routes, pushing rates higher and prompting some shipments into the pricier spot market. Analysts warn of potential upward pressure on the prices of a wide range of goods, amplifying concerns about global inflation.

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Source: the arab weekly