THE RED SEA: IS THE STRATEGIC ROUTE IN DANGER?

The conflict in the Red Sea due to attacks by Yemen’s Houthis continues, hampering supply chains, driving up rates, and even impacting South America.

 

Since October last year, attacks by Yemen’s Houthis have caused many of the ships and container ships transiting the Red Sea and Suez Canal to be diverted along safer routes around the Cape of Good Hope. As a result of this, rates have experienced an increase, even between 40 to 60%, in addition to delays of between 15 to 20 days on average, causing uncertainty in companies when scheduling a load.

An example of this is that spot rates, mainly on the Asia-Europe route, have been affected. According to the Shanghai Containerized Freight Index (SCFI), last Friday, China to Northern Europe increased from US$177/TEU to US$2,871/TEU.

If the Freightos Baltic Index (FBX) is also taken into account in its latest measurement of spot rates for the same route from Asia to Northern Europe, an increase of 151% is recorded to US$4,042/FEU.

But this conflict not only impacts nearby countries or the Asia-Northern Europe route but has brought repercussions to South America. The east coast of the US and the east coast of South America have been indirectly affected by the redistribution of shipping companies to maintain their service levels.

As indicated by Peter Sand, an analyst at Xeneta, he recommends taking the ship operator into account when booking cargo. Although the route used will have an impact on transit times, and according to Sea Intelligence, this factor fell by 61% in November of the previous year, it is interesting to consider that the consulting firm has noticed that the Schedule reliability figures follow a similar trajectory to 2020.

Therefore, constant monitoring and analysis of market conditions to manage risks and cargo flows is recommended in this crisis. Also do not lose sight of the spot market and long-term contracts, available capacity, and where it is deployed. As a last consideration, it is suggested to review the 2024 maritime transport budget again, since, according to Peter Sand, the estimates from a month ago would be “retired.”

January 10, 2024
Source: MundoMaritimo

 

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