AVN WEB DESK
LONDON/LOS ANGELES: As shipping rates for crucial global routes have witnessed a significant surge this week, prompted by US and UK military actions in Yemen, industry experts fear long-term disruption to global trade in the Red Sea, one of the world’s busiest maritime routes, sparking another round of inflation.
Recent US and British airstrikes targeted Iran-backed Houthi forces in Yemen as retaliation for attacks on shipping in the Red Sea, escalating tensions stemming from Israel’s attacks in Gaza.
Because of the volatile situation, many container ships are now opting to avoid the nearby Suez Canal, a shortcut for nearly one-third of container ship cargo from Asia to Europe.
The escalating situation raises concerns that essential carriers, such as oil tankers and bulk carriers transporting vital commodities like grain, may also divert from the shortcut, posing a new threat to global inflation.
The Shanghai Containerized Freight Index, a key indicator of container shipping rates out of China, has surged over 16pc week-on-week to 2,206 points. This index, measuring non-contract “spot” rates, has experienced a remarkable 114pc increase since mid-December.
Specifically, rates on the Shanghai-Europe route rose 8.1pc to $3,103 per 20-foot container, while rates for containers bound for the unaffected US West Coast soared by 43.2pc to $3,974 per 40-foot container week-on-week, as reported by ship broker Clarksons.
The China Containerized Freight Index (CCFI) has recorded its most substantial increase on record in both nominal and percentage terms. Jefferies analyst Omar Nokta reported that the CCFI, measuring both spot and liner contracts, surged by 21.7pc to reach 1,140 points.
Peter Sand, chief analyst at freight platform Xeneta, expressed concern about the ongoing crisis, stating, “The longer this crisis goes on, the more disruption it will cause to ocean freight shipping across the globe, and costs will continue to rise.” Sand anticipates a resolution to be months away rather than a matter of weeks or days.
Major container ship operators, including Maersk and Hapag-Lloyd, have redirected their Suez Canal-bound vessels to the longer route around Africa’s Cape of Good Hope. This strategic shift has led to disrupted vessel schedules, cargo delays, and a sharp increase in shipping costs.
Analyst Nokta predicts that oil tankers and various ship types will likely follow suit in higher numbers in the short term.
Amid the Red Sea crisis fallout, major importers are already reporting adverse effects. Tesla announced a temporary suspension of most car production at its Berlin factory due to component shortages resulting from Red Sea-related diversions. Global furniture retailer IKEA also warned of potential product delays.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, noted, “The price of a vast range of goods threatens to march upwards again.”
Rerouting a ship around Africa incurs approximately $2 million in additional fuel costs for each Asia-Northern Europe round-trip. Carriers are recovering these costs through surcharges and other measures.
Container ship operators are readjusting their vessels to the most affected European and Mediterranean trade lanes to compensate for longer sailing times on rerouted ships. This has led to reduced available vessel space for cargo moving on Transpacific and North-South routes, consequently increasing costs on those trade lanes, according to Jefferies analyst Nokta.
Simultaneously, customers report that vessel operators are rationing less expensive, contract-rate space and compelling a portion of their shipments into the pricier spot market.
