What is the impact of the Red Sea incident on international shipping business!

Following the grounding and blockage of the Suez Canal in 2021, the Asia Europe shipping hub has once again faced challenges.Recently, there have been frequent attacks on cargo ships in the waters near the Red Sea. Several shipping giants, including MSC, Maersk, CMA CGM, and Hapag Lloyd, have announced the suspension of Red Sea navigation. Some shipping companies have notified the cessation of cargo loading and booking of new cabins.The Red Sea incidentOn December 18th, Pengpai News exclusively learned from freight forwarding companies that due to the impact of the international situation, COSCO Shipping, OOCL, and EMC have verbally notified the suspension of the loading of goods on the Red Sea route. ONE Ocean Network Shipping has also verbally notified the suspension of cargo loading on the Red Sea route. The above messages have not been formally communicated and are all verbal notifications. It is worth noting that Dafei Shipping, COSCO Shipping, Evergreen Shipping, and Dongfang Overseas have previously formed an alliance through cooperation.In addition, the freight forwarder also stated that Mediterranean Shipping (MSC) is currently only notifying to detour around the southern tip of Africa’s Cape of Good Hope and has not suspended the loading of goods in related directions. Hapag Lloyd has notified that, except for VIP guests, bookings for Middle East, Red Sea, and Mediterranean routes on the west and east coasts are temporarily suspended and awaiting further notice.According to CCTV news, since the outbreak of the new round of Palestinian Israeli conflict on October 7th, the Yemeni Houthi armed forces have repeatedly claimed to launch strikes on targets within Israel. The Houthi armed forces have used missiles and drones to attack targets in the Red Sea area multiple times. Starting from mid November, the Hussai armed forces expanded their range of attacks on Israeli targets and began striking ships related to Israel in the Red Sea, continuously escalating related threats. Recently, multiple cargo ships have been attacked in the Red Sea, the Strait of Mandela, and nearby waters.Many industry insiders told reporters from The Paper that the current security situation in the Red Sea and surrounding waters is unstable, and the suspension of flights and operations may become a major trend.Or influenced by the above factors, as of the close on December 18th, the shipping sector led the two markets to rise, driving the transportation sector to rise at the forefront. Among them, Longjiang Transportation (601188), Longzhou Shares (002682), Zhongchuang Logistics (603967), Shanghai Yashi (603329), Ningbo COSCO Shipping (601022) and others rose the limit.A freight forwarder told a reporter from The Paper that procurement levels in Europe have decreased this year, demand has been weak, and freight rates have been decreasing. However, spot market freight rates have gradually increased since the end of November. On the 18th, we received news from the shipping company that the Far East to the eastern coast of the Mediterranean route has significantly increased. The freight rates of the Mediterranean route ZMP, exclusively operated by Star Line, will double in early January next year compared to late December this year. The freight rate to the northern port of Israel (HAIFA) has increased to $6800/FEU (40 foot long container), and the freight rate to the second largest port in western Israel (Ashdod) has increased to $7000/FEU.Several industry insiders have pointed out that the suspension of red sea navigation and cargo pickup by consolidation companies may push up freight rates on Asia Europe routes in the short term.The freight rates from China to Europe have risen sharply for four consecutive weeks. According to data released by the Shanghai Shipping Exchange, on December 15th, the market freight rate (sea freight and sea freight surcharge) for exports from Shanghai Port to the European base port was 1029 US dollars/TEU, an increase of 11.2% from the previous period. According to a report from the Shanghai Shipping Exchange, transportation demand in Europe remained stable last week, and capacity allocation continued to be regulated during the signing season. The supply and demand relationship was good, and market freight rates increased significantly. On December 8th, the freight rate was $925/TEU, an increase of 8.7% from the previous period. On December 1st, the freight rate was $851/TEU, an increase of 9.2% from the previous period. On November 24th, the freight rate was $779/TEU, an increase of 10.2% from the previous period. On November 17th, the freight rate was $707/TEU, a 2.1% decrease from the previous period.In terms of Mediterranean routes, the market situation is basically synchronized with European routes. On December 15th, the freight rate (sea freight and sea freight surcharge) for exports from Shanghai Port to the basic port market in the Mediterranean was $1569/TEU, an increase of 13.1% compared to the previous period. On December 8th, the freight rate was $1387/TEU, an increase of 10.1% from the previous period. On December 1st, the freight rate was $1260/TEU, an increase of 6.6% from the previous period. On November 24th, the freight rate was $1182/TEU, an increase of 3.1% from the previous period. On November 17th, the freight rate was $1147/TEU, a 3.1% decrease from the previous period.”The announcement by the shipping company to bypass the Cape of Good Hope is largely to find reasons for the increase in freight rates, which is good news for the shipping company.” Zhao Yifei said that the shipping company has announced a suspension of operations due to the risk of war, which is different from the 2021 Changzhihao. Changzhihao has blocked the canal, making it impossible for other ships to pass through, and the attack by the Husai armed forces on ships passing through the Red Sea does not hinder other ships from passing through the Red Sea and the Suez Canal, “If the shipowner and cargo owner purchase war additional insurance, they can claim compensation from the insurer in case of armed attack and loss. Therefore, even if the shipowner increases the price, the increase in price is limited to the insurance rate.”In addition, several captains and insiders of the consolidation company told reporters that this incident is a double-edged sword for shipping companies. Currently, trade is in a low valley, especially with global consolidation capacity surplus and reduced routes due to less cargo and more ships, which is actually beneficial for shipping companies to increase container freight rates.Several freight forwarders told the reporter from Pengpai News that high short-term freight rates will increase the profit margin for freight forwarders. One of the Shanghai freight forwarders told a reporter from Pengpai News that it is currently uncertain whether the goods passing through the Red Sea can be shipped normally. The volume of goods in the Red Sea has increased significantly in recent weeks, and there have been serious warehouse closures. The follow-up shipping plan is currently undecided, and it is expected that the freight rates on Asia Europe routes will increase from the end of December to early next year.Another freight forwarder stated that the positive aspect of this incident is that it can provide more logistics solutions for shippers. However, some freight forwarders have also stated that due to the unfavorable overall environment this year and the traditional shipping peak season driven by Christmas in Europe approaching its end, a slight increase in freight rates has little impact as cargo volume has also decreased.

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