The container shipping market has adapted to the problems in the Red Sea

Container shipping has gradually adapted to changes in routes due to Houthi attacks in the Red Sea, resulting in freight costs falling for the first time in two months. All major shipping lines turned their ships to the Cape of Good Hope, preferring the route around Africa instead of passing through Suez. Egypt is paying for the conflict: revenues from the Suez Canal have fallen by almost half, and the passage of container ships by two-thirds.

The container shipping market has adapted to the problems in the Red Sea. As The Loadstar reports, all of the world’s largest container lines, except CMA CGM, have officially launched routes from Suez around Africa – around the Cape of Good Hope. And the French company, according to unofficial data, did this: a Reuters source told the agency that such a decision was made, in particular, in connection with the Houthi attack on the convoy, which included the CMA CGM ship.

The stabilization of the market was reflected in a decrease in container freight rates – in the last week monitored (from February 1), the Drewry WCI index showed a decrease of 4% for the first time in two months after a 2.9-fold jump since the end of November.

On January 25, at its peak, it reached $3.9 thousand per FEU (40-foot container), while on November 30 it was at $1.4 thousand. However, even taking into account the recent decline, the index is still at a high level, which is 88% higher than on the same date in 2023. An even higher gap is shown by the index on the Shanghai-Rotterdam route ($4.7 thousand) – it is 169% higher than last year’s level. The upcoming Chinese New Year is also driving up rates: suppliers rushing to deliver goods before the long holidays are being charged up to $10,000, The Loadstar reports.

Attacks on the merchant fleet began on November 19, 2023 with the hijacking of the ro-ro vessel Galaxy Leader. A month later, all major container lines announced the suspension of traffic in the Red Sea, some began to redirect ships in a roundabout way (see “Kommersant” dated December 18). From the start of the attacks to the end of January, 30 ships were attacked, including ten oil and chemical tankers, ten container ships, eight bulk carriers and two ro-ro vessels, according to a Reuters tally. The attacks do not subside even in February. Thus, according to Al-Arabiya on February 6, Houthi spokesman Yahya Saria said that the ships Star Nasia and Morning Tide, flying the flags of the Marshall Islands and Barbados, respectively, were attacked. The speaker called them American and British. Morning Tide is owned by the British Furadino Shipping, Star Nasia is owned by the Greek Star Bulk SA.

The reversal of traffic towards the Cape of Good Hope has brought huge losses to the Suez Canal, which accounted for 12-15% of global trade in 2023, according to UNCTAD.

“For container trade, this route is even more important,” says Jan Hoffmann, head of the UNCTAD trade facilitation section. “20% of global container trade passes through the Suez Canal.” Last week, the head of the Suez Canal Authority, Osama Rabia, said that in January the number of ships passing through the canal had fallen by 36% by January 2023. “In January of last year, revenues amounted to $804 million, this year – $428 million,” he said. “This is 46% less.” According to January UNCTAD data, in less than two months since the conflict escalated, the passage of ships through the canal fell by 39%, and the volume of cargo transported decreased by 45%. Container ship throughput fell particularly sharply, by 67%.

As Jan Hoffmann notes, this is the third major world trade route to be destabilized. He noted that the state of global maritime trade is already being negatively affected by the conflict in Ukraine, which has disrupted the structure of global oil and grain trade, as well as the shallowing of the Panama Canal due to drought and El Niño. Mr Hoffmann said ship traffic through the Panama Canal in December was down 36% from last year and 62% by 2022.

Natalya Skorlygina