Dive Brief:
- Rates for ocean shipping continues to climb as safety remains uncertain for carriers moving cargo through the Red Sea, according to Jan. 10 rate data from Freightos.
- Asia to Northern Europe rates rose 176% week over week to $4,391 per forty foot equivalent unit. Similarly, Asia to the U.S. West Coast grew 60% to $2,713 per FEU.
- “The next couple weeks will likely be the worst in terms of capacity shortages and possible congestion,” Freightos Head of Research Judah Levine said in an Jan. 10 email update.
Dive Insight:
The Suez Canal has become a less viable route to move goods, and shippers are feeling the effects through rate increases, longer transit times and delays expected to continue for the foreseeable future, according to several shipping experts.
“This double whammy of higher cost and slower service is just the beginning of the headaches,” Richie Daigle, Supply Chain Evangelist at Tive told Supply Chain Dive. Shippers also must manage the land portion of transportation.
”If shippers choose to use different ports, then there may be implications on warehousing and domestic transportation as well,” Daigle said.
Levine said new rates and surcharges announced by carriers may push near- term Red Sea lane prices past $6,000 per FEU as volumes are expected to shift to the West Coast.
Season lulls following the Lunar New Year in late January may result in lower rates later in February but could remain higher than usual until Red Sea container traffic resumes normal levels, Levine said.
Not only that but vessels that continue to travel through the Suez Canal will face additional surcharges for war risk, which several carriers have announced.
Data from project44 shows median days that vessel schedules are trending late has increased as much as 310% on some lanes with about 264 vessel rerouted as of Jan. 11. Estimated time of arrivals is ranging between seven to 20 days for impacted vessels.
But not all ocean carriers have decided to divert cargo. Evergreen, HMM, Yang Ming, OOCL and COSCO are still moving cargo through the Suez Canal, but it’s worth noting that fleet from carriers who are diverting represent 62% of global capacity, Freightos said.
“Shippers should note that the short-term impact is larger than the long-term impact. Right now many vessels had to take extremely long detours as they were ‘caught’ in the wrong position when the Bab al-Mandeb became a no-go area,” Lars Jensen, CEO and partner at Vespucci Maritime said in a LinkedIn post.
In other words, shippers should note there will be a difference between delays that have been seen in the past three weeks versus delays they need to plan on going forward, Jensen added.
There is also warning of empty container shortages.
“Empty container shortages due to dislocation, port congestion, and increased demand for rail, road and air services are among the fall-on effects possible from these disruptions,” Brian Whitlock, senior director and analyst at Gartner Supply Chain practice, said in a December report.
While some experts have raised concerns, Sea-Intelligence CEO Alan Murphy suggests it may be inappropriate to call the Red Sea situation a disaster “when the current crisis is placed in the context of what the supply chains had to endure during the pandemic disruptions,” CEO Alan Murphy at Sea-Intelligence said in a press release.
These events, while highly disruptive, are unlikely to create the kind of disruption seen in 2021, Whitlock said.
