Ocean freight charges are rising as a result of carriers postponing plans to resume transits via the Red Sea, a crucial route that connects to the Suez Canal commerce route, following a missile strike and attempted kidnapping of a Maersk ship this past weekend.

Since November, Houthi rebels from Yemen have been assaulting valuable cargo ships in the Red Sea as a show of support for Hamas, the Palestinian Islamist organisation that is fighting Israel in Gaza. Even if the rates are still far lower than the epidemic levels reached in 2021, it has caused ships to detour around the southern tip of Africa, increasing the expense for vessels for the longer voyage.

The quickest route for shipping food, petroleum, and consumer products from Asia and the Middle East to Europe is via Egypt’s Suez Canal, which links the Red Sea to the Mediterranean Sea. Up to one-third of all container freight worldwide, including toys, furniture, tennis shoes, and frozen food, is transported via this route by shippers.

Given that other companies, like IKEA, Walmart, and Amazon, use the Suez route, the attacks are already causing delays in the delivery of goods intended for multiple enterprises.

According to Freightos, a platform for international freight booking and payments, the cost of a 40-foot container from Asia to North Europe more than doubled this week to over $4,000. The cost of a container from Asia to the Mediterranean increased to $5,175.

According to Judah Levine, head of research at Freightos, several carriers have published rates for Mediterranean shipments starting in mid-month that are more than $6,000 per 40-foot container. Surcharges ranging from $500 to $2,700 per container could push all-in pricing much higher.

In order to escape the threats, hundreds of cargo ships and other boats were diverted as of Wednesday; this might extend their journeys by seven to twenty days.

According to logistics executives, the so-called one-time “spot” pricing are around twice as high as those for goods that is traded on the contract market.

“People desperate to get space (on ships), are going to pay,” said Christian Sur, executive vice president for ocean freight at Unique Logistics.

Less-affected rates Ports in North America are likewise rising.

The Suez Canal is used by up to 30% of freight that arrives in the East Coast of the United States. Executives in logistics anticipate that a portion of those imports will be redirected to the U.S. West Coast, which is directly across the Pacific Ocean from exporters in Asia like China.

The cost of shipping a 40-foot container from Asia to the East Coast of North America increased by 55% to $3,900. Prices on the West Coast surged 63% to over $2,700 ahead of anticipated freight reroutes to avoid problems with the Red Sea, according to Levine.

Rates have increased, but they are still much lower than the record highs set in 2021 by the pandemic, which were $14,000 for a 40-foot container from Asia to North Europe and the Mediterranean and $22,000 for a container from Asia to the East Coast of North America.

(Adapted from TheDailyStar.net)

Categories: Economy & Finance, Geopolitics, Strategy, Uncategorized