As we have discussed previously, the disruption in the Red Sea continues to be a very fluid situation.  This security situation is abruptly and seriously impacting Freight Rates because it is creating a supply and demand imbalance.   Here are some facts to understand this crisis and why it is impacting freight rates not only to and from the region but potentially worldwide.

• Prior to the disruption created by the Houthis in Yemen at ships transiting the Bab-El-Mandeb (straight between Yemen/ Arabian Peninsula and Africa and the entrance to the Red Sea and further the route into the Suez Canal) which began Mid-December carriers were in full swing of increased blank sailings.
• The effects of increased blank sailings (the cancellation of a previously scheduled sailing) had already begun to put pressure on supply.  Essentially, carriers modify their schedules to match demand with available cargo volumes.
• Carriers anticipating world-wide container shortages and increased cost for diverting and re-routing of their vessels has them moving essentially in lock step to increase rate levels.  Recall, the shipping lines stocks rose sharply right after the December 18 attack which resulted in several shipping lines announcing they would not transit the Suez Canal route.
• Normal flows of containers are being interrupted because vessels have not been able to discharge their cargo on schedule, which, produces shortages of equipment.
• Most container carriers continue to divert away from the Suez Canal and instead sail around the Cape of Good Hope in Africa extending transit time from the Far East to the Mediterranean, North Europe, and US East Coast.
• There are significant reports daily of both military action by the US and UK and continued strikes by the Houthis making it difficult to contemplate the possibility of de-escalation currently.

The numbers are significant:

Freight Rates: Far East into US East Coast up 79%

Freight Rates: Far East into US West Coast up 170%

Pressure to get volumes moved before Chinese New Year; demand created by the Crisis in the Red Sea; as well as blank sailings are all contributing to the increases in the currently climbing market.

We will keep you advised.  For now, we encourage you to book your containers shipments as early as possible and consider the ramifications of these cost increases in your pricing.  Please call if you have questions.

January 18, 2024