Box freight rates rise again as diversions resume
Maersk drops Red Sea routing for foreseeable future as situation remains unstable
Capacity soaked up by extended passages will reduce available slots, supporting freight rates. Carrier surcharges are also adding to costs for shippers
AFTER jumping by 40% in the final week of 2023, container spot freight rate rises have eased back, according to data from the Shanghai Containerised Freight Index.
The index rose 7.8% this week to 1896.65 and now stands at nearly 90% higher than at the beginning of December, when attacks on vessels passing through the Bab el Mandeb Strait began to escalate.
Rates for Asia-Europe services, which were below $1,000 per teu as recently as early December, now stand at $2,871 per teu, while the Asia-Mediterranean services have seen rates increase from $1,260 per teu to $3,620 per teu.
Drewry’s wider World Container Index recorded a 61% increase to $2,570 per feu, which puts it up 25% on the corresponding week in 2023.
“Freight rates on Shanghai to Rotterdam skyrocketed by 115%, or $1,910, to $3,577 per feu,” Drewry noted. “Rates on Shanghai to Genoa rose by 114%, or $2,222, to $4,178 per 40 ft box.”
But it is not just on the major Asia-Europe head haul that rates have increased on the back of vessels rerouting around South Africa to avoid the Red Sea.
The SCFI also showed gains on unrelated trades including the transpacific eastbound, which was up 8.7% to $2,775 per feu.
The hikes come as capacity is soaked up by carrier diversions that add an extra 10 days to voyages, with over 300 ships comprising around 4.5m teu having diverted from the Suez route to date.
Although the rate of increase has slowed this week, rates are set to remain higher for the foreseeable future.
“The elevated rates are expected to hold through January and February as capacity will remain tight in the next six weeks,” said analysts at Linerlytica.
Linerlytica said 12% of global containership capacity was currently diverted to the Cape of Good Hope route and the numbers would continue to rise after the latest Houthi attacks forced Maersk to suspend Red Sea transits again.
“The impact of the diversions will impact capacity available for departures from Asia starting from week four onwards, with significant drops in Asia-Europe and US east coast capacity of up to 30% on certain weeks.”
Further increases were expected throughout coming weeks, it added, with CMA CGM, for example, announcing new FAK (freight all kinds) rates of $3,200 per feu from January 15.
“Capacity will tighten, especially from week four onwards, with increased blank sailings as a result of the delayed arrival of ships coming back from Europe,” Linerlytica said.
Maersk today confirmed it would not be transiting the Red Sea until the security situation stabilised.
“The situation is constantly evolving and remains highly volatile. All available intelligence at hand confirms that the security risk continues to be at a significantly elevated level,” it said in a statement.
“We have therefore decided that all Maersk vessels due to transit the Red Sea/Gulf of Aden will be diverted south around the Cape of Good Hope for the foreseeable future.”
It warned that the ongoing disruption could lead to challenges to supply chains.
“While we continue to hope for a sustainable resolution in the near-future and do all we can to contribute towards it, we do encourage customers to prepare for complications in the area to persist and for there to be significant disruption to the global network,” Maersk said.
As Lloyd’s List reported earlier, Maersk has also imposed a series of surcharges on shippers booking on diverted voyages.
Moreover, the effect on shippers could last beyond any resumption of Red Sea voyages.
“Even once the Red Sea is back in full usage, the difficulties for shipping companies will continue for several months,” said Patrick Lepperhoff, principal at supply chain management consultancy Inverto.
“The six days of canal blockage in 2021 disrupted the precisely timed schedules of the ports in the Mediterranean and North Sea for months. This further exacerbated the container shortage and freight rates remained at a high level.
“Shipping companies have already begun introducing extra surcharges. Customers are already feeling the impact of the Red Sea blockade.”
Meanwhile, Jefferies analyst Omar Nokta noted that for carriers, the disruption was helping to normalise the supply and demand imbalance.
“Fleet supply and demand balance has jumped from a utilisation figure we estimated at a weak 77% to a stronger 88%,” he said.
“This sudden shift has created a squeeze in near-term vessel availability and freight rates have surged to well-above profitable levels.
“We expect spot rates to remain well-supported in the near-term but expect the ongoing squeeze to abate as schedules are adjusted and more ships become available. However, we believe freight rates will likely establish a higher floor than previously expected given the overall disruptions.”