Red Sea Disruptions Hike Shipping Costs - Fitch
(8 March 2024 – China) Chinese exporters trading with European markets are set to incur elevated shipping costs for an extended period of time as the Red Sea crisis intensifies according to Fitch Ratings.
An estimated two thirds of Chinese trade with Europe routes through the Suez Canal. Some vessels now face detours and heightened costs lengthening the transit by 10 to 15 days around the Cape of Good Hope.
Nearly one in two cargo ships and tankers are diverting away from the Suez Canal in response to attacks on commercial shipping in one of the busiest shipping lanes in the world. As a result, container freight rates have surged with the World Container Index rising by 151 percent since October 2023. Rates on Asia–Europe routes have increased by 284 percent and more than doubled on other main East–West lanes.
“Red Sea disruptions have persisted beyond our initial expectations in December 2023, with no sign of abatement. Re-routing around Africa has increased transit time for container movement on the Asia Europe route by about 50 percent, absorbing capacity in the container shipping sector. While operators have some flexibility to offset the longer routes by increasing vessel sailing speed, low excess capacity means other measures, such as the use of idled fleet or delaying planned vessel scrapping, have a limited impact on capacity absorption“ said Fitch Director, Corporates Raman Singla.
“We maintain our view that the nature and implications of these disruptions are significantly different from those in 2021–2022, which were related to broader supply-chain issues, including port congestions, a pandemic-related decline in port efficiencies, and container dislocations”
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