Container Vessel Rates Rise As Red Sea Waterway Crisis Continues

With the sharp decline in merchant shipping activity in the Red Sea and the continued rise in container ship rates on the Europe-Asia route, international shipping is facing a new threat of "Mediterranean or bust".

The gross tonnage of container vessel arriving in the Gulf of Aden has plummeted 82 percent in the past four days compared to the first half of this month, according to the latest data from Clarkson Research Services.

According to the report, 85% of the container vessel liner companies have notified the suspension of the Red Sea route cargo.

Many merchant ships bound for Eurasia have abandoned the Red Sea-Suez route and diverted to the Cape of Good Hope. Logistics company Kuehne + Nagel International AG had released a report on Wednesday that at least 100 container vessel had been diverted near the Cape of Good Hope; the number of vessels diverted would be even higher by the end of the week.

This means that global merchant shipping distances and transportation costs will increase significantly. According to media estimates, the global voyage distance has increased by 40% so far, while the transportation cost has risen by more than 40%.

Container vessel transportation index, market freight rates continue to rise. Container shipping index (European line) futures main contract for five consecutive trading days have touched the stop, a week of cumulative increase of more than 50%.

The latest weekly report shows that the composite index of transport market tariffs for Asia-Europe and other routes has increased by 14.8% to 1,254.99 points; the market tariffs for export from Shanghai port to Europe and the Mediterranean Sea basic ports have already reached US$1,497/TEU (20-foot containers) and US$2,054/FEU (40-foot containers), and the tariffs for the Persian Gulf routes have also reached US$1,477/TEU.

Previously, 8.8 million barrels of oil and nearly 380 million tons of cargo would cross the border every day on a corridor that carries 12% of international trade and nearly 1/3 of global container traffic.

Mediterranean or Closed?

According to the Securities Times, a number of large shipping companies, including Maersk, Hapag-Lloyd, Mediterranean, Duffy and Evergreen Marine, have announced the suspension of the Red Sea-Suez Canal route and a detour to the Cape of Good Hope.

At present, the Red Sea seems to be entering a "freezing period", and the global supply chain may face the risk of paralysis.