The turmoil in the Red Sea is causing major disruptions in the market for container shipping, which the pandemic also did. From the start, the prize trouser has been fastest this time.
Illustration photo of a container ship at a port in Germany. Maersk is among several large container shipping companies that give customers extra shipping costs in connection with the longer route that is sailed to avoid the Red Sea. Photo: AXEL HEIMKEN / AFP / NTBPublished: Published:
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The ship attacks in the Red Sea have sent the price of container freight at sea up several hundred percent on some routes. Especially on routes that usually pass through this area, but where the ships now sail around Africa instead, the shipping prices are skyrocketing.
Today’s level is still well below the price peaks during the pandemic, but a calculation from the shipping technology company Xeneta shows that the recovery has happened faster now.
– You get a more immediate shock, says Xeneta CEO Patrik Berglund to E24 about the current situation.
– Container shipping is pure supply and demand, and now the supply is being throttled. This means that the situation is likely to persist, even if there is no actual increase in demand such as during covid. Instead, there will be an artificial increase in demand as companies panic and book cargo to avoid potentially empty warehouses, he adds.
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Thinks the shipping downturn will persist: – Will be under pressure
– Free and open market
Due to the artificial demand, Berglund emphasizes that the rate situation can turn around.
– When the companies have filled up their warehouses, you will possibly see a sharp decline again, he says.
The container shipping companies have a lot of pricing power and Berglund emphasizes that they now “get an insane basis to raise prices towards customers”.
– One can speculate whether they learned a bit during covid. But it is a free and open market, where it is “fair” that those who offer something can set their own price. And in this market, the customer largely accepts the increases.
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The unrest in the Red Sea: – Expect a price increase
After the pandemic, several of the shipping companies were accused of having taken advantage of the situation and of having collaborated to increase shipping prices.
– In the cases I have seen, a conclusion has been reached that the shipping companies have not been involved in any price cooperation and that there had been nothing suspicious, says Berglund.
– If it had been, then the market would not have dropped as much as it did in 2023. If there had not been open competition, that drop would never have taken place, he adds.
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Sees more channel squeeze effect for shipping sector: – Can maintain high rates
Powerful jumps
Drewry’s World Container Index, which shows the average price for shipping a 40-foot container in the spot market, peaked during the pandemic at around $10,000.
Now the level is at 3,964 dollars. That’s up from about $1,500 in mid-December. In the main, it is the routes that usually involve the Suez Canal that have risen sharply, and some of these are now over 6,000 dollars.
Disruptions usually send freight rates up because it ties up ship capacity and tightens the relationship between supply and demand. At the same time, a number of the large container shipping companies have now imposed various additional costs on their customers for shipping.
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Shipping shares at record level after January dips: – Strong lift
– Not sufficient in the long term
Analysts recently said that they do not believe the increased rates are enough to turn around the burdened financial situation of several of the largest container shipping lines.
This is largely because so many new ships were ordered when the market was extremely strong during the corona pandemic. These are delivered in a market that is heavily back from the corona peaks despite the recent ups and downs.
– We believe it will not be sufficient in the long term, given significant overcapacity in the sector in the foreseeable future. It helps, yes, but it still doesn’t make the outlook good, says DNB Markets analyst Jørgen Lian.
Head of analysis at Kepler Cheuvreux, Axel Styrman, has the same view.
– Even adjusted for the effects of the longer distances for volumes that primarily go from the Far East to Europe, the market will be under pressure as the pace of delivery of new construction escalates throughout the year, he explains.
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Shipping crack: – Dramatic drop
2024-01-29 13:11:53
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