After the attacks launched by the Houthis in Yemen, supported by Iran, against commercial ships affiliated with Israel in the Bab al-Mandeb Strait in the Red Sea, the travel times of the ships are extending to 10 to 14 days as the shipping companies change their routes to the Cape of Good Hope. It is stated that the travel times of some ships extend up to 20 days.
While ship traffic in the Red Sea continued to decrease rapidly following the attacks launched against the Houthis under the leadership of the USA and the UK and the advice to shipping companies not to use the region, freight prices increased due to the increase in travel times and costs of ships traveling around the Cape of Good Hope.
Nearly three months have passed since the tension in the Red Sea, and although the increase in freight prices has slowed down, prices are still quite high.
According to information compiled from maritime research company Drewry’s World Container Index, the 40-point container composite index was at $1382 on November 30.
Due to the escalation of tension in the Red Sea and the ships rapidly shifting their routes to the longer route, the Cape of Good Hope, prices increased for eight weeks, reaching up to 3 thousand 964 dollars on January 25. Freight prices increased by 186.8 percent during this period.
The 40 container composite index decreased to 3 thousand 824 dollars as of February 1 and to 3 thousand 786 dollars as of February 8. Thus, prices decreased by 4.5 percent in the last two weeks.
However, while freight prices increased by 90 percent as of February 8 compared to the same week last year, they are 174 percent higher than their level on November 30 and 167 percent higher than their pre-epidemic level.
As of February 8, the freight price of a 40-foot container on the Shanghai-Genoa line decreased by 11 percent on a weekly basis to 5 thousand 225 dollars, on the Shanghai-Rotterdam line it decreased by 5 percent to 4 thousand 426 dollars, and on the New York-Rotterdam line it decreased by 4 percent to 611 dollars. Prices increased by 8 percent to 4,771 dollars on the Shanghai-Los Angeles line during this period, and by 2 percent to 6,268 dollars on the Shanghai-New York line.
CRISIS MAY LAST UNTIL A SOLUTION IS FOUND IN THE RED SEA
Experts state that transportation companies are adjusting their plans and budgets according to the longer route, and although the tension continues, the rush experienced in the first period has begun to normalize.
Experts state that the tension in the Red Sea does not affect the USA, but European importers are the most affected by the crisis, and predict that the crisis will continue for a while until a solution is found in the Red Sea.
CONTAINER VOLUME DECREASED BY 80 PERCENT
According to data from the Germany-based economic research organization Kiel Institute for the World Economy (IfW Kiel), the amount of cargo transported through the Red Sea decreased by more than half in December last year, while the number of containers passing through the Red Sea and Suez Canal in January was 80 percent less than before the crisis.
Arrivals at ports in southern and northern Europe are delayed as ships travel around Africa and the Cape of Good Hope. In Hamburg and Bremerhaven, as well as in Rotterdam and Antwerp, there are 25 percent fewer ships docking as of January 2024 compared to the 2023 average.
Julian Hinz, President of the Kiel Trade Indicator, stated that currently container ships are significantly delayed compared to their original plans, resulting in fewer ships arriving in many European ports.
However, stating that this difference will normalize as longer travel routes are taken into account in logistics planning, Hinz said, “Especially the amount of goods shipped globally shows that global trade is not in crisis and trade remains stable. Although some companies suffer from delivery delays, in general there is no loss of raw materials or consumer goods.” “No restrictions are expected. One reason for the boom in trade may be the Chinese New Year, because trade in China usually increases before holidays but tends to decrease afterwards.” he said.
Vincent Clerc, Chief Executive of the Danish shipping company Maersk, stated in his statement that one-third of the company’s container volume is affected by the disruptions in Red Sea traffic, and that they need to be sure that this will continue permanently in order for their ships to start transiting through the Red Sea again.
Clerc stated that the current situation cannot be compared to the epidemic period, when freight prices and shipping companies’ profits increased greatly, and that prices will drop rapidly as soon as ship passage through the Suez Canal begins.
MANY COMPANIES CHANGED THEIR ROUTES
After the Houthis in Yemen attacked Israeli-related ships in the Bab al-Mandeb Strait in the Red Sea, Maersk was among the first companies to divert the ships to the Cape of Good Hope. In a statement made on January 5, after one of its ships was attacked by the Houthis, Maersk announced that it was decided that all ships passing through the Red Sea-Gulf of Aden would be directed south around the Cape of Good Hope in the near future.
The world’s largest container company, the Italian-Swiss joint venture Mediterranean Shipping Company, the German shipping company Hapag-Lloyd, the French shipping company CMA CGM and the British energy company BP, suspended their voyages in the region and shifted the ships’ route to the Cape of Good Hope.
While the Danish tanker company Torm stopped all its passages from the south of the Red Sea, the energy company Shell also suspended its passages from the Red Sea.
It was announced that there would be delays of up to 10-12 days in Qatar’s liquefied natural gas cargoes going to Europe due to extended transit distances.
Approximately 12 percent of global trade is carried out through the Suez Canal, which connects the Mediterranean to the Red Sea and offers the shortest route between Europe and Asia.