(News Bulletin 247) – Attacks in the Red Sea have the effect of extending container transport times and therefore increasing freight rates, i.e. tariffs. Since these incidents, the capitalization of shipowners on the stock market has increased significantly.
Incidents have increased in the Red Sea in recent weeks, with a series of drone attacks on container ships. The main shipowners, the Danish Maersk, the German Hapag-Lloyd, the French CMA CGM and the Swiss MSC were therefore forced to suspend their traffic in the Red Sea.
Initially, “the Houthi rebels claimed that they ‘only’ attacked vessels linked to or owned/operated by entities affiliated with Israel,” Stifel explains in a note published this week. But recently, “drone attacks seem to be hitting targets indiscriminately,” adds the research office.
This Thursday, Ikea recognized that the situation around the Suez Canal was complicating the delivery of some of its products, without specifying the nature of this for competition reasons. The furniture giant will try to find new options to supply its stores.
An expensive alternative
These incidents have, as a result, completely disrupted global maritime traffic. In its note, Stifel recalled that the Red Sea and, by extension, the Suez Canal constitute “one of the main arteries of container trade”.
“Especially since the canal – which already sees more than 10% of global maritime trade – has been used for several weeks as an alternative to Panama, saturated due to insufficient water levels, for several Asia-East coast lines of the States -United”, says Le Marin, a media specializing in the maritime economy.
“The only viable alternative for container shippers is to go via the Cape of Good Hope, which extends the journey time by around a third,” continues Stifel. This bypass “represents an additional navigation time of 10 days”, specifies Le Marin.
The freight rate, that is to say to simplify tariffs, should therefore increase in the short term on all trade using the Suez Canal, adds the site specializing in maritime economics. This increase is explained by the fact that a large number of ships are choosing to avoid the conflict zone, where insurance costs are increasing sharply, reports Bloomberg.
Furthermore, this increase in transport costs can also be explained by lower availability of ships. “Larger distances keep fleets occupied longer, reducing the supply of ships. Delays will also cause disruptions, as ships arrive at their destinations later than expected and are then delayed returning to their next cargo, which further reduces the supply of ships,” Bloomberg also recalls.
Kuehne+Nagel, a global logistics giant, said on Wednesday it had had to divert 103 container ships heading to Africa, a figure expected to increase in the coming days.
A favorable environment
The stock prices of the world’s main shipowners have skyrocketed with the escalation of the situation in the Red Sea. Danish shipowner Maersk saw its share price jump 20%
since December 12, when Kuehne+Nagel regained 7% since the intensification of attacks in the region.
Bloomberg, for its part, specifies the extent of these gains for all companies in the sector listed on the stock exchange. The combined market capitalization of the companies making up the Solactive Global Shipping Index – a German index which brings together the 47 shipowners listed on the stock exchange – reached almost 190 billion dollars on Wednesday. On December 12, it stood at $166.2 billion, and $143 billion at its annual low in June.
For its part, Stifel recalls that “spot maritime freight rates increased even before the escalation in the Red Sea”. The intermediary says that on the “Far East trade lane, rates have increased by approximately 55% among major suppliers since the lows of mid-October.”
Much like ocean freight, Stifel says it continues to see a steady increase in air freight rates. The latter which have increased by a further 20% over the last four weeks and by almost 75% since the summer low.
All classes were stopped early Friday afternoon
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