The Houthi attacks on commercial shipping began in December 2023 and show no sign of ending, with the major container shipping lines scheduling the 3,500 mile diversion around the Cape of Good Hope until maritime security can be guaranteed.
The effective closure of the Suez Canal to container shipping has suddenly lengthened supply chains to and from Asia by 7-10 days and we are expecting a significant impact on departures from Asia to Europe, with approximately 40% to 50% of shipments missing in weeks six and seven, causing disruptions in the return supply of equipment to Asia.
With less available vessel capacity and 40% more fuel required to sail around the Cape sea freight rates are expected to continue rising, albeit at a slower pace, leading up to the Chinese New Year holiday and while we can anticipate some stabilisation in the traditionally quieter period after CNY, much will depend on vessel capacity utilisation and demand.
The duration of the disruption is the key unknown, but there is no indication of the Red Sea situation cooling down at this time and the carriers currently estimate that we may not see any easing of the situation until at least the second quarter.
The expected effect on equipment shortages, port congestion and ship schedules could be sharp, though hopefully short-lived, as supply chains reorganise around the longer transit times of sailing around the southern tip of Africa.
Freight rate levels will remain elevated beyond the first quarter as carriers’ operating costs have increased substantially, driven by greater bunker consumption.
It will take them time to reposition vessels, so capacity disruptions will be worse at this stage, but things should ease as networks recalibrate for planned diversions.
Unsurprisingly we’re seeing a surge in US East Coast consignments using the Panama Canal, together with rising demand on the US West Coast and space is becoming an issue on nearly all major trades, which is why we would urge you to share your shipping deadlines, so that we can book your space and services at the best possible rates.
With Chinese New Year starting on Saturday 10th February, the cut-off for air freight from the region is fast approaching for all services. We have solutions for all your time-sensitive shipments, but it is critical that you contact us now, so that we can ensure your deadlines are all hit.
If you have any questions or concerns about the impact of the Suez situation on your Asia supply chain, or would like to discuss its wider implications, please email Andy Costara.
