Carriers implement surcharges on diverted vessels from the Red Sea

The recent increase in Red Sea attacks by Yemen's Houthi militants has prompted major shipping companies, including MSC, Hapag-Lloyd and CMA CGM, to reroute their vessels away from the Suez Canal. The Houthis, responding to the Israel-Gaza conflict, have escalated attacks, targeting commercial vessels and impacting East-West trade routes, especially for oil. The recent attacks have raised war risk insurance premiums and added significant costs to voyages.

Many carriers are rerouting some services around Africa's Cape of Good Hope, leading to longer sailing times. Maersk on the other hand, has said it is preparing to resume shipping operations through the Red Sea.

Diverting vessels around the Cape of Good Hope to mitigate the ongoing risks of sailing through the region is a necessary step in the interest of safety, but it has ultimately brought about increased costs for carriers. These additional charges are effective immediately until further notice and will apply to bookings to and from Far East Asia that are subject to diversion.

We are taking proactive measures to ensure the safety and timely delivery of your shipments. We understand that these changes may affect your planning but our team is here to support you through these challenges.

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What does the Red Sea crisis mean for global trade?

With approximately 12% of worldwide trade passing through the Red Sea, including 30% of global container traffic, billions of dollars' worth of traded goods and supplies navigate through this crucial pathway. Delays in this region have the potential to impact petrol prices, the accessibility of electronics, and various other facets of global trade.  

The announcement of BP temporarily suspending shipments through the Red Sea led to a surge in oil and fossil gas prices. Analysts warn that if the attacks on vessels persist and more oil companies follow suit by halting shipments through the Red Sea, the likelihood of further increases in energy costs is substantial.

Shipping companies are confronted with a binary decision: either face the risk of navigating through the Red Sea, which comes with elevated insurance expenses, or opt to reroute their vessels, adding at least nine days and 3,500 nautical miles to the journey.  

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Service suspensions to 2024 networks for some ocean shipping carriers

Ocean shipping alliances, particularly THE Alliance partners like Hapag-Lloyd, ONE, Yang Ming and HMM are making changes to their shipping routes and services for 2024. Unlike last year, they are not as optimistic and are adjusting their plans based on uncertainties in demand for shipping between Asia, Europe, and the US.

One significant change is that they are likely to suspend or temporarily stop some of their services, particularly the PS5 loop from Asia to the US west coast. This is due to the current market situation and the need to adapt to demand changes. They are also continuing to suspend the FE5 loop from Asia to North Europe, which started in November and might last until at least April.

THE Alliance may introduce more ships to their network to ensure better coverage and a reliable schedule, but overall, their tone is more cautious compared to the previous year. Other shipping alliances, like the Ocean Alliance, are expected to announce their plans soon.

We recommend anyone shipping globally to stay informed about these developments to anticipate potential challenges in their supply chain.

If you have any concerns, speak to your Unsworth representative who can help make necessary adjustments in scheduling and inventory management to ensure the smooth and timely delivery of goods.

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Carriers to increase 2024 rates

Shipping companies that transport goods between Asia and Europe are trying to increase their rates for 2024. Hapag-Lloyd and CMA CGM have raised their rates for shipping a standard container (40ft) on this route. However, the rates are still much lower than what these companies aim for.

Drewry's index shows that the current average rate for this route is $1,343 per container, even after a recent 15% increase. Hapag-Lloyd plans to charge $3,000 per container for Asia to North Europe and $3,200 for West Mediterranean from 1st January. Other shipping companies are expected to follow suit.

Some shippers had trouble booking shipments for December, as shipping companies cancelled around 40% of their planned sailings from China, creating a tighter market.

With the Chinese New Year holiday starting on 10th February, the shipping companies want to maximise their earnings before the factories in China shut down for the holiday. However, there are concerns about a supply and demand imbalance in the shipping industry. If the situation doesn't improve, it's predicted that shipping companies may take more drastic measures, such as idling vessels or closing entire shipping routes, especially after the Chinese New Year.

Unsworth can aid clients in mitigating the effects of rate increases by optimising costs, providing real-time insights, suggesting alternative routes, ensuring transparent pricing, and facilitating efficient documentation processes. Through our advanced digital tools and expertise, we are here to help clients navigate the changes, ensuring cost-effective and streamlined transportation of goods.

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Panama Canal increases daily transit slots

Despite an ongoing severe drought, the Panama Canal Authority (PCA) is taking steps to increase its capacity by reusing water between lock chambers, allowing two ships to go through at the same time, and optimising the transit schedule.

The maximum size of ships allowed has been slightly reduced, and the number of daily transits had gone down. Initially, it was expected to decrease further by February. However, the PCA recently announced that it would be able to offer 24 slots a day from mid-January.

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Supply outweighs demand for shipping containers  

According to BIMCO, there's going to be more shipping containers available than needed in 2024 and 2025, and this will likely put pressure on shipping prices. The number of new large ships being built is adding to this surplus.  

To tackle this, some ship deliveries that were planned for 2023 are being delayed to 2024. The total capacity of container fleets is expected to increase by a significant amount by late 2024, compared to December 2020.

There's a hope that more old ships will be scrapped in 2024 and 2025 due to environmental rules and lower rental rates, which could help balance the oversupply issue.

Unless shipping companies take strong actions like reducing the number of available ships to match the actual demand. The report suggests that while it's unlikely that shipping rates will increase significantly, companies may focus more on adjusting their fleet size to match the real demand for shipping services.

No two logistics challenges are the same. We understand this and tailor our solutions to meet your specific needs. Our teams work closely with you to develop strategies that address your unique challenges effectively and efficiently.

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Surge in ex-China e-commerce drives Air freight rates upontinue

A surge in online shopping from China has caused a shortage of air cargo space, leading to some goods being rerouted through other Asian points before reaching the US and Europe. Around 2,000 to 3,000 tons of e-commerce products are leaving Hong Kong daily, especially due to Christmas demand.  

The demand for Chinese e-commerce goods is driven by the influx of cheap merchandise flooding the market, aligning with consumers' focus on saving money amid rising interest rates and inflation. The surge has significantly impacted air cargo rates, leading to challenges in long-term contract discussions.

Many shippers are turning to the spot market in the hope of lower rates in the future. The duration of this e-commerce-driven peak remains uncertain, with factors like Chinese New Year potentially influencing its continuation.  

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Pathway: The value of 24/7 visibility

With the recent events in the Red Sea, shipment visibility and supply chain agility are more important than ever. Access hundreds of data points and gain the insights you need to make decisions quickly, focusing valuable time and energy where it’s needed to better facilitate international trade within your global freight network and supply chain.  

React to schedule changes, plan around delays, expedite shipments to cover stock shortfalls and be on your way to a more powerful supply chain with Pathway.

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At Unsworth, we pride ourselves on being more than just a service provider; we are a team of experienced individuals passionate about delivering outstanding freight and supply chain management.

As always, we're here to answer your questions, address your concerns, and provide expert guidance whenever you need it. Please don't hesitate to reach out to us.