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Ocean cargo rates climb after new Red Sea ship attacks

January 3, 2024 at 8:46 pm

A cargo ship crosses the Suez Canal on December 29, 2023 [Fareed Kotb/Anadolu via Getty Images]

Ocean freight rates are surging after a missile attack and attempted hijacking of a Maersk ship this weekend prompted carriers to suspend plans to restart transits through the Red Sea, a key artery to the vital Suez Canal trade route, Reuters reports.

The Yemen-based Houthi group has been attacking high-value cargo vessels in the Red Sea since November in a show of support for Palestinian group, Hamas, fighting Israel in Gaza. It has forced ships to re-route around the southern tip of Africa, driving up the cost for vessels for the longer voyage, though rates are still far below pandemic levels reached in 2021.

Egypt’s Suez Canal connects the Red Sea to the Mediterranean Sea and is the fastest way to ship fuel, food and consumer goods from Asia and the Middle East to Europe. Shippers use the route to ferry about one-third of all global container cargo, including toys, tennis shoes, furniture and frozen food.

The attacks are already delaying delivery of products destined for numerous companies, as the Suez route is used by the likes of IKEA, Walmart and Amazon.

FACTBOX – Shipping firms react to Houthi attacks in the Red Sea

Asia-to-North Europe rates more than doubled to above $4,000 per 40-foot container this week, with Asia-to-Mediterranean prices climbing to $5,175, according to Freightos, a booking and payments platform for international freight.

Some carriers have announced rates above $6,000 per 40-foot container for Mediterranean shipments starting mid-month, and surcharges of $500 to as much as $2,700 per container could make all-in prices even higher, Judah Levine, Freightos’ head of research, said in an email.

As of Wednesday, more than 180 container ships and other vessels have been re-routed around Africa’s southern Cape of Good Hope to avoid the attacks – adding anywhere from 7 to 20 days to their voyages, according to supply chain management technology company project44.

Rates to North American ports are also higher.

About one-third of cargo that arrives at the US East Coast travels through the Suez Canal. Logistics executives expect some of that cargo to be diverted to the US West Coast – which is a straight shot across the Pacific Ocean from China and other Asian exporters.

Rates for shipments from Asia to North America’s East Coast climbed 55 per cent to $3,900 per 40-foot container. West Coast prices jumped 63 per cent to more than $2,700 ahead of expected cargo diversions to avoid Red Sea-related issues, Levine said.

While rates have spiked, they remain far below 2021’s pandemic-fuelled record highs of $14,000 per 40-foot container for Asia to North Europe and the Mediterranean and $22,000 for Asia to North America’s East Coast.

READ: Yemen Houthis claim to attack Israel-bound ship in Red Sea