The crisis in the Red Sea shows no signs of abating as missile attacks by the Houthi rebels against international shipping continue, with the latest blow being a missile attack on a Greek-owned cargo ship with no casualties or damage.
Attacks on ships in region of the Red Sea have reduced traffic through the Suez Canal, the shortest sea route between Asia and Europe, through which about 15% of the world's maritime trade volume normally passes.
Instead, several shipping companies have now turned their ships around the Cape of Good Hope.
This translates for the container shipping industry into an increase in delivery times of 10 days or more, higher costs for shipping and a lack of capacity.
According to container industry expert John D. McCown, the Asia-Europe lane accounts for about 25% of the world's container miles, and a one-third increase in standard travel distance results in global capacity being absorbed by 8 %.
Furthermore, sector pricing has also been favorably impacted by strong global volume, rising 9.2% year-on-year in Q1 2024, the strongest quarterly growth since the pandemic.< /p>
Mr McCown notes that the market continues to look positive for container carriers in the second quarter, with spot container rates up more than 30% in recent weeks as the peak season approaches .
Regarding the route of ships and the management of risks in the Red Sea, shipping companies will have to make their own decisions while Maersk has stated that it will continue to route its ships through the Cape of Good Hope in immediate future.
According to the International Monetary Fund, the volume of trade passing through the Suez Canal fell by 50% year-on-year in the first two months of the year, while that passing around the Cape of Good Hope is estimated to have increased by 74%. above last year's level.
The International Monetary Fund (IMF) January-February 2024 monitoring platform reports a 6.7% year-on-year decline in port calls across 70 ports in sub-Saharan Africa .
The corresponding decreases for the European Union and the Middle East and Central Asia were 5.3%.
These probably reflect the transitory effects of longer sailing times. If they continue, the knock-on effects of these disruptions could temporarily disrupt some supply chains in affected countries and cause upward pressure on inflation (in part due to higher transportation costs).
Rising fares< /strong>
At the beginning of 2024 Suez Canal crossings were down more than 42% compared to their peak values.
Whichever route container ships take, they face time-consuming diversions and increased costs. For example, avoiding the Suez Canal adds at least 3,000 nautical miles and 10 days of sailing time to each voyage by diverting through the Cape of Good Hope.
During the week Drewry's global container index rose 16% to $4,072 per 40ft container this week and is 187% higher than the 2019 (pre-pandemic) average of $1,420.
The freight rates Shanghai to Rotterdam rose 20% or $827 to $4,999 per 40ft container.
Similarly, prices from Shanghai to Los Angeles rose 18% or $801 to $5,277 per feu .
Prices from Shanghai to Genoa climbed 15% or $718 to $5,494 per 40ft box. Accordingly, prices from Shanghai to New York jumped 13% or $746 to $6,463 per 40ft container. Also, prices from Rotterdam to New York rose 1% or $32 to $2,241 per feu.
Profits rebound
Significant earnings rebound , reaching $5.4 billion the container shipping industry showed in the first quarter of 2024.
According to data from container industry expert McCown after six consecutive quarters of declining results from earnings peak at $63.1 billion in Q2 2022, the industry posted net earnings of $5.4 billion in Q1 2024, a sharp rebound.
The main support for liner profits were higher fares due to the disruption from Houthi attacks on International Shipping in the Red Sea and the subsequent rerouting of ships from the Horn of Africa by absorbing excess tonnage – a factor cited in the separate reports.
