THE Red Sea crisis and diversions around the Cape of Good Hope are unlikely to have a material effect on containership oversupply, which, in turn, will see the current high freight rates normalise relatively quickly as new schedules settle.

Effective capacity available would be affected by the longer voyage times, Drewry container research manager Simon Heaney said in a webinar, but the impact would be far less than during the pandemic.

“While we expect there will be more ships and a greater nominal capacity, the diversions mean not all of them will be carrying as much cargo over the course of the year,” he said.

“When you sail longer distances it squeezes effective capacity; longer transit times reduce the number of round voyages a ship can make in any one year.”

Before the impact of diversions began to be felt, Drewry had expected effective capacity to increase by 9% this year. It now thinks growth will be lower, at close to 5%.

It bases this on the calculation that 30% of capacity passes through the Red Sea and that sailing times for those vessels that divert has increased by 30%.

In terms of supply and demand, this “barely moves the needle”.

“It might seem like a big number but stripping out 9% for the entire year, with all other things being equal, only raises our supply/demand index to 81, far below the 100 that signifies a balanced market,” Heaney said.

The capacity constraints would be felt most on services directly related to the Suez routing, which explained freight rate increases in recent weeks.

“But the market globally is so heavily oversupplied following the ordering rush of the pandemic that there is ample room to cover disruption such as this,” Heaney said.

“More ships are needed but there is spare capacity in the idle fleet, newbuildings and oversupplied trades.”

The Drewry baseline assumption is that disruptions will last for at least the first six months of this year. But even it lasts longer than that it will not flip the overcapacity story, Heaney said.

Rates on the effected trades were likely to stay elevated for the duration of the crisis, but won’t go so high as to stoke inflation.

“The current situation is only partly comparable to the pandemic,” he said.

“These days demand is much more pedestrian and the supply chain issues are localised to the sea leg. The additional capacity that is bad news to carriers in more normal times does provide resilience to cope with events such as those we are seeing.”

Nevertheless, it would still take time to reposition ships.

“In our view the pinch will be worse at the initial stage but we think things should ease once Red Sea diversions become part of longer-term planning by carriers,” Heaney said.

That initial phase should end soon, however, according to Drewry Supply Chain Advisors director Philip Damas.

“The timing was unfortunate, coinciding with Chinese New Year demand,” he said.

Delays in ships returning to Asia meant there were 34 cancelled sailings announced over the next five weeks, representing nearly a quarter of sailings.

“This is what is behind the increase in spot rates,” Damas said.

Longer lead times and transit times were affecting shippers, made worse by the fact that the delays were not expected.

“But once carriers have settled down and rescheduled their services then it will be easier to manage for shippers,” he said.

From the third quarter onwards, the trend towards overcapacity will also bring down freight rates, Damas added.

“There is a temporary pinch effect where ships and containers are in the wrong place,” he said.

“Yes, there are significant increases in spot rates, but these are already softening after the recent bounce.”

The overall trend was still down, and Drewry still expects that rates on east-west trades will decline 10% in 2024 compared with 2023.

“The Red Sea shipping crisis is not in itself sufficient to reverse the trend in the market,” Damas said.