THE Red Sea crisis has pushed up short-term container freight rates at the fastest pace in history as carriers urgently rerouted around the Cape of Good Hope, throwing schedules into disarray.

The speed of the increases is linked to how quickly the disruption took hold and shows a “chaotic” market, according to Xeneta analyst Emily Stausbøll.

“Under Covid there was a gradual build up of congestion, whereas this was from one week to the next a major chokepoint for this trade being shut down,” she said.

Longer term freight rates had also seen increases, with the composite China Containerised Freight Index, which includes contract rates, increasing 84% in the past eight weeks.

Prior to the crisis the low rates meant it was a “no-brainer” to sign one- or two-year contracts when Asia-Europe rates were under $1,500 per feu, said Xeneta chief analyst Peter Sand.

“Coming into the January there was a slight boost from ETS surcharges, then we saw the impact of the 200% rise in spot rates,” he said. “More recently, long-term rates have risen above $2,000 per feu, but there is a lag in long-term rates.”

But the past two weeks have seen the rate of spot rate increases stall, with some key trade lanes losing some of the gains made.

“Carriers have pushed through GRIs and will try again for February, but peak disruption may have already passed,” Stausbøll said. “We are coming to a new understanding of where the market will land with rates coming down from their peak.”

But with uncertainty peaking now and with demand traditionally falling in February and March, many shippers were already postponing their tenders, she said.

Carriers had been struggling to see what services they could provide depending on where ships were, and that had led to last minute blankings and uncertainty for shippers.

“Hopefully, in the weeks after February 10, carriers can build in the longer transit times and know what they can offer,” Stausbøll said.

At that point, shippers could look into their long-term rates again.

“Weakening spot rates show we’ve got the major push out of Asia,” she said. “People are understanding where capacity is and everything is calming down a little bit.”

Moreover, the return to an oversupplied market would benefit shippers who waited.

“If you look back to 2019, supply began to rise and has grown 21% since then,” Stausbøll said.

“Demand, however, is pretty much flat. That imbalance will get worse this year with high deliveries.”

It remained to be seen what impact rerouting would have on overall teu-mile demand.

“Teu-mile demand will go up as sailing distances are longer,” Stausbøll said.

“But even with the longer distances we don’t see the teu-mile demand increasing at anywhere near the pace it would need to re-establish the balance we had even in 2019, let alone when the fundamentals were more in carriers’ favour.”

Speaking in a webinar yesterday, Drewry Supply Chain Advisors director Philip Damas also warned shippers against committing themselves too soon.

“The difficult question is for anyone negotiating annual contracts now,” Damas said.

“There is a real risk that it could lock in very high rates and shippers could be stuck with these high rates for a full year. There needs to be a consideration of contract duration, or renegotiation later to benefit from the resumption of normal operations.”

Those normal operations could come sooner than expected.

“We are likely to have seen the worse,” said Sea-Intelligence chief executive Alan Murphy.

“With the security situation having deteriorated in recent weeks, the carriers appear to be settling in to firm new schedules going around Africa. This brings an element of stability and predictability, which will remove some of the upheaval we saw initially.

“All in all, we do expect that right now, we are witnessing the Peak Disruptive Impact of the Red Sea crisis and that the conditions for the shippers will improve somewhat in the time ahead.”