Global Shipping Route Changes Amid Houthi Rebel Attacks
Following the Houthi rebel attacks against commercial shipping in the Bab al-Mandab Strait that started in December 2023, all major container shipping lines have suspended their services via Red Sea and through the Suez Canal.
Ships are diverted via the Cape of Good Hope until a safe passage can be guaranteed, which significantly increases transit times between Asia and Europe and require shipping lines to increase planned capacity. Cost increases are being implemented immediately.
Economic & Demand Outlook
Empty container stocks in Europe and Asia are decreasing due to prolonged transit times via Cape of Good Hope routes. This situation is exacerbated by customers increasing their order volumes for restocking and advancing seasonality.
A delicate geopolitical climate, coupled with apprehension over potential changes to Customs regulations post the US elections in November, is fueling demand on the Transpacific route.
Consequently, all major Beneficial Cargo Owners (BCOs) are increasing their forecasts as of May 2024.
Capacity Outlook
The idle fleet is currently minimal as all available capacity is deployed to meet the additional demand prompted by Cape routings. Non-artificial blank sailings in the Asia-Europe market are primarily due to capacity shortages, resulting in insufficient vessels to maintain regular weekly port calls. This lack of vessels leads to ongoing port omissions and blank sailings, perpetually fueling the rolling pools.
From Q3, alliances reorganization is set to absorb capacity, potentially triggering further disruptions in the supply chain and naturally escalating safety stocks and short-term demand.
Port congestion is an escalating issue.
Data from Liner lytica reveals that container ships at Singapore are experiencing up to seven-day berthing delays, with a recent queue of up to 450,000 TEU of vessels.
Globally, worsening port congestion has immobilized approximately 2 million TEU of ships, nearly 7% of the fleet. This situation is indirectly bolstering carrier rate hikes.
Carriers have declared significant General Rates Increases (GRIs) for May and June. The Shanghai Containerized Freight Index (SCFI) witnessed a week-over-week increment of 7%, with a notable rise of 12% on the Asia-Europe route. However, the actual rates needed to load cargo are proving to be even higher.
Our Recommendation
DHL recommends making pre-bookings 4 to 6 weeks prior to departure to ensure timely and efficient service.
Credit: DHL Global