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Shipping Rates Surge Amid Red Sea Threats and Suez Canal Slowdown

4 Jan 2024 9:59 pm
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Mumbai, 04 Jan 2024 (Commoditiescontrol): Short-term shipping rates for container transport between Asia, Europe, and the US are increasing due to reduced capacity caused by threats to cargo vessels in the Red Sea. The spot rate for a 40-foot container from Asia to northern Europe has surged to over $4,000, a 173% increase since mid-December. Additionally, costs from Asia to the Mediterranean have risen to $5,175, with some carriers proposing prices above $6,000 for this route from mid-January. Rates from Asia to North America's East Coast have also increased by 55% to $3,900 for a 40-foot container.

The spike in rates is partly due to the slowdown in Suez Canal traffic, which has fallen significantly as ships take longer routes to avoid potential missile strikes from Houthi militants in Yemen. Shipping lines are raising prices due to stretched capacity, adding surcharges for extended delivery times and during busy periods.

Recent attacks near the grave of an Iranian commander, which killed nearly 100 people, may escalate the Middle East conflict, with Tehran attributing the attacks to its stance against Israel. This situation is contributing to the disruption in shipping routes.

The slowdown in Suez Canal traffic has been confirmed by the International Monetary Fund’s PortWatch platform, showing a 28% decrease in Suez transits in the 10 days through January 2. This aligns with 3.1% of global commerce being diverted from the Red Sea. The IMF has highlighted the Red Sea as a crucial shipping lane with over 19,000 vessel transits annually.

For cargo owners, the increased spot rates pose a risk of elevated costs in long-term contract negotiations, typically held between March and May. Most ocean freight operates on these contract rates. The impact of these developments is not limited to the container sector but affects broader shipping and global trade dynamics.

(By Commoditiescontrol Bureau; +91-9820130172)

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