$COSCO SHP SG (F83.SG)$$SamuderaShipping (S56.SG)$ Mass dive...
Mass diversions of container ships around Africa's Cape of Good Hope caused spot rates to surge, but the Red Sea effect has a limit, which may have already been reached.
Upward momentum has slackened. Rates in most lanes have leveled off. Several indexes for European lanes have pulled back.
"The squeeze in freight rates into Europe continues to abate from high levels, though freight rates in other regions remain firm," said Jefferies shipping analyst Omar Nokta on Fri.
The rate dynamic now is very different than in the pandemic boom. The 2020-2022 supply chain crisis was driven by demand, as consumers bought more goods amid the pandemic. The current rate surge is driven by supply.
Liner diversions around the Cape of Good Hope extend voyage time, tying up ship and container equipment supply. But as liners adjust schedules to the longer routes, rates should theoretically stop rising, barring higher demand.
Container lines are taking delivery of a record number of new ships this year, which should give them the added vessel supply to handle longer routes. Furthermore, the Chinese New Year holiday in early Feb should temporarily limit vessel demand, easing the squeeze.
Lars Jensen, CEO of consultancy Vespucci Maritime, wrote in an online post: "Once we get past Chinese New Year, not only will demand drop and give some breathing room, [but] we will also begin to see vessels and equipment flows settle into a predictable pattern on their new round-Africa routings.
"This will still mean rates are much higher than pre-crisis levels, because the longer routes will soak up large amounts of capacity and carry extra cost, but I expect the spike in spot rates to abate somewhat. Contract rates, on the other hand, are likely to increase as it appears we might be settling into a round-Africa [pattern] for the foreseeable future.”
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丰衣足食 : The Red Sea crisis, the Russian-Ukrainian conflict, and the Panama Canal drought are disrupting global trade
2024-1-29 8:57:31 From: Financial Federation 0 people have participated in commenting
On Thursday (January 25) local time, the United Nations Conference on Trade and Development warned that the Red Sea crisis, the Russian-Ukrainian conflict, and the Panama Canal drought were disrupting global trade.
Jan Hoffman, director of the Trade and Logistics Division of the United Nations Conference on Trade and Development, said that global shipping costs have soared, and energy and food costs have also been affected, increasing the risk of inflation.
Since Yemen's Houthis began attacking ships in the Red Sea and nearby waters, major players in the global shipping industry have temporarily stopped crossing the Suez Canal. The Suez Canal connects the Mediterranean Sea to the Red Sea and is an important channel for transporting energy and goods between Asia and Europe.
Hoffman quoted data as saying that the Suez Canal's throughput in 2023 will account for 12% to 15% of global trade, but according to estimates by the United Nations Conference on Trade and Development, the volume of trade using the Suez Canal has declined by 42% in the past two months.
According to statistics, since November last year, the Houthis have launched at least 34 attacks on ships in the Red Sea and nearby waters. Although the US and British forces have launched air strikes against Houthi strongholds in Yemen, the group continues to attack merchant ships.
Hoffman pointed out that while the throughput of the Suez Canal has declined sharply, other major global trade routes are also under pressure.
He said that since the Russia-Ukraine conflict began in 2022, the conflict and other geopolitical tensions that have continued for nearly two years have reshaped oil and food trade routes, including routes through the Black Sea.
To make matters worse for shipping companies, severe droughts have lowered the water level of the Panama Canal to its lowest point in decades, clearly limiting the number and size of ships that can pass through the canal.
According to Hoffman, the Panama Canal's throughput in December of last year dropped 36% from a year ago and 62% from two years ago.
He said that about 80% of goods in global trade are transported by ship, and this share is even higher in developing countries.
Hoffman said that since this year, more than 300 container ships (accounting for more than 20% of the world's container capacity) are transferring or planning to use an alternative to the Suez Canal. Many boats choose to bypass the Cape of Good Hope at the southern tip of the continent; this is a longer and more expensive voyage.
Global shipping costs are soaring. Hoffman said that since the beginning of December last year, the average freight rate of container shipping from Shanghai has risen 122%, the freight rate from Shanghai to Europe has risen 256%, and the freight rate to the west coast of the United States has risen 162%.
Hoffman said, “The global impact of this crisis is being felt as ships seek alternative routes and avoid the Suez Canal and the Panama Canal
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