Ocean Cargo freight rates have started to climb in the wake of Red Sea attacks on vessels by Houthi rebels.
Houthi militants have been attacking vessels traveling through the Bab-al Mandab, a narrow strait between the African and Arabian Peninsula. The militants have claimed they are attacking only Israeli-bound vessels.
These attacks have forced container firms to avoid the Red Sea and opt for a longer and costlier journey around the Cape of Good Hope.
Attacks have delayed the delivery of products destined for numerous companies including IKEA, Walmart, Amazon and Next.
Shippers use the Suez Canal, which connects the Red Sea to the Mediterranean Sea, and is the fastest way to ship food, fuel and consumer items from Asia and to Europe.
Approximately one-third of all global container cargo, including toys, tennis shoes, furniture and frozen food is transported through the canal, Reuters reports.
The Drewry Container Index, a key metric for container rates, has increased by 61% to $2,670 per 40-foot container. This was the latest metric as published on the of 4th January.
This figure is 88% more than the average pre-pandemic rate of 2019 which was $1,420 per 40-foot container.
Asia to Northern Europe rates have more than doubled to above $4,000 per 40-foot-container according to Reuters. Asia to Mediterranean prices have climbed to $5,775 according to Freightos, a booking and payment platform for international freight.
Some carriers have announced rates of about $6,000 per 40-foot container for Mediterranean shipments starting the middle of January.
Surcharges of between $500 to $2,700 per container are being levied.
While much of the rate rises are impacting Asia to Europe and Mediterranean, there is an uptick in rate rises to North America.
30% of cargo that arrives at East Coast ports travels through the Suez Canal but many experts expect some of these imports to be diverted to the US West Coast.
West Coast prices jumped up by 64% to more than $2,700 per 40-foot container ahead of the expected cargo diversions.
Rates for shipments from Asia to North America’s East Coast climbed 55% to $3,900 per 40-foot container.
Market observers expect the East-West spot rates to increase in coming weeks, if the Red Sea situation continues.
Shares in leading shipping operators have surged in recent weeks due to the rising rates. Maersk’s share jumped up by 19% in the past 3 weeks and Hapag-Lloyd’s shares went up by 34% according to the Wall Street Journal.
New shipping capacity is expected to enter the market this year equivalent to 11% of the current shipping capacity, according to DNB markets.