THE impact of the Red Sea crisis on container shipping may have reached an inflection point, with indications emerging of some normalisation following the Chinese New Year holidays.

Despite a sharp increase in freight rates since late last year when carriers began to divert away from the Red Sea, rates appear to have reached something of a plateau.

“In the medium term, we expect that we could be reaching an inflection point,” said Flexport Benelux ocean freight manager Guillaume Caill.

“We have seen the Shanghai Containerised Freight Index decline slightly for the first time since mid-November.

He expects rates to stay high until Chinese New Year as carriers are full for the coming weeks.

“But then we anticipate a gradual price normalisation towards March, but rates will settle at a higher level than before the Red Sea crisis, due to all the additional costs of the longer route,” Caill said.

Rates benchmarking platform Xeneta expects there is still some increase to come ahead of Chinese New Year, with rates on Asia-Mediterranean set to rise 11% and Asia-Europe 8% by February 2.

But it too expects there is likely to be a fall off after the holiday.

“We are hearing that carriers are now no longer offering the most expensive premium services which guarantee freight will be shipped during periods of extreme pressure on available capacity,” said Xeneta chief analyst Peter Sand.

“This may suggest there is a waning demand for this level of service because the urgency is fading from the shipper side, or perhaps it is because capacity is available after all, despite the chaos caused by carriers pausing transits through the Suez Canal.”

He added that the Red Sea crisis was one of capacity rather than demand, which had been the case during the pandemic.

Caill also said demand was a key difference in the market this time around.

“There is a seasonal peak due to the pre-Chinese New Year rush, but we expect those volumes to cool after Chinese New Year,” he said.

“On the capacity side the carriers have much bigger fleets than in 2021. The fleet grew by around 20% from January 2021 to January 2024, a substantial increase.”

The market needed around 800,000 teu to compensate for the additional time in rerouting, but more than 2m teu were delivered last year alone.

“That is already enough to cover the capacity needed,” Caill said.

It was not just the physical capacity that mattered, however. Ships needed to be in the right place at the right time in the right network.

“The industry has the capacity to digest the new routing, but it requires some structural network adjustments and those cannot be done instantly, which is why in the short term we saw rates skyrocket,” Caill said.

Xeneta’s Sand said rerouting had caused headaches for carriers trying to maintain schedules.

“Carriers are trying to readjust services to make up for the additional sailing time around the Cape of Good Hope,” he said.

“For example, they are cutting journeys short, missing port calls and increasing sailing speed.”

But those initial disruptions are now being baked in to new services. Line in recent days have announced a slew of service modifications that are set to stay in place as long as the Red Sea route from Asia to the Mediterranean and Europe remains closed.

Maersk, for example, today announced changes to 12 services to Europe and the US east coast that have been affected by the events in the Red Sea.

“While we continue to hope for a sustainable resolution in the near-future and do all we can to contribute towards it, the situation currently remains untenable, and we encourage customers to prepare for complications in the area to persist and for there to be significant disruption to the global network,” Maersk said.

These changes would mean that a complete return to pre-crisis freight levels was not on the cards, Caill said.

“We expect rates to stabilise at their current level for the coming weeks,” he said. “But once Chinese New Year has passed we would expect a gradual price decrease.

“We don’t expect a freefall to back to where rates were before the crisis for the simple reason that as long as there is a service that needs to go around the Cape of Good Hope the costs are higher.

“It will be a gradual decrease but it will settle at higher levels than one or two months ago.”