5.8 C
Hamburg
Thursday, April 18, 2024
Home Most Visited Red Sea crisis: Markets spike, consumers will pay the price

Red Sea crisis: Markets spike, consumers will pay the price

Consumers around the world are expected to pay the price for the unfolding crisis in the Red Sea after missile attacks on merchant ships plunged supply chains into chaos.

Latest data from shipping analysis firm Xeneta shows spot rates in the ocean freight shipping market spiked by 20% since Friday (15 December) after major shipping liner companies decided to halt sailings through the Red Sea amid the attacks by Houthi militia.

Peter Sand, Xeneta chief analyst, commented, "The region is essentially in a war situation because it is too dangerous for many vessels to sail through the Red Sea and therefore also the Suez Canal, which is the major artery for world trade.

"Ships are now being re-routed via the Cape of Good Hope, but not only will this add up to 10 days sailing time, it will cost up to US$1 million extra in fuel for every round trip between the Far East and North Europe.

"If we look at container shipping alone, Xeneta estimates the diversion via Africa will also require additional shipping capacity in the region of one million TEUs.

"There is capacity in the market, but it will come at a cost, and we could see ocean freight shipping rates increase by 100%. This is a cost that will ultimately be passed on to consumers who are buying the goods."

On 18 December, the US Secretary of Defense Lloyd Austin announced ‘Operation Prosperity Guardian’, a coalition task force to combat the Houthi attacks and protect merchant ships sailing through the Red Sea and Gulf of Aden. This builds upon the existing Task Force 153 in the region to tackle piracy.

"We are now seeing action from politicians, but we do not know how or when this coalition will be successful in opening safe passage for vessels through the Red Sea and Gulf of Aden. Everything is at stake here because free-flowing global trade effects almost every single human being on earth. The Suez Canal is absolutely critical with many billions of dollars in goods passing through every day from the Far East towards North Europe, the Mediterranean and the US East Coast," said Sand.

The longer this disruption lasts the more expensive and painful it will be, according to Sand, who believes that supply chains have still not fully recovered from the pandemic, "with schedule reliability between Far East and North Europe standing at just 64%" and warns that this latest crisis could set that recovery back even further.

He adds, "We may also see this impact current negotiations between shippers and ocean freight carriers for long-term contracts for 2024. Shippers may feel a level of concern that long-term rates could follow the spot market and increase dramatically as a result of this crisis."





Antonis Karamalegkos
Managing Editor

Latest Posts

Singapore Shipping Association unveils tool to enhance cyber risk management

Singapore Shipping Association (SSA), a trade association advocating for the interests of over 500 Singapore-based companies involved in ship owning, operating, and maritime services,...

MSC applies new prices from Far East to Europe

Swiss/Italian container carrier MSC will implement the following new Freight All Kind (FAK) rates from Asia to Europe. Effective as from 1 May but not...

Port of Antwerp-Bruges handles over 3.2 million TEUs in first quarter

The Port of Antwerp-Bruges said that despite the ongoing complexities in geopolitics and macroeconomics, its volume growth, primarily driven by a resurgence in container...

Port of Rotterdam achieves 10% CO2 emission reduction in 2023

In 2023, there was a 10% reduction in CO2 emissions at the port of Rotterdam compared to 2022, amounting to a decrease of 2.2...

ONE and Portchain ink deal to drive sustainability

In the fall of 2023, Ocean Network Express (ONE) partnered with Portchain to focus efforts on enhancing collaboration with container terminals through the innovative...