The Red Sea crisis shoots up shipping companies’ bills and drives up prices

While waiting for the United States to definitively assemble a coalition of countries to return security to the Red Sea and the Suez Canal threatened by the Houthi militias, the main maritime freight transport companies have launched their own CIA contingency planes. This is already leading to the reorganization of the arrival schedules of many cargo ships in ports around the world, and the diversion of a large part of the traffic from Asia (China) to Europe and America through the Cape of Good Hope (South Africa). Which forces us to surround the entire African continent. Container giants such as Maersk, MSC, CMA CGM Group, together with the German Hapag – LLoyd and the Chinese Cosco or the Taiwanese Evergreen, among others, temporarily opt for this alternative. That is, more time (10 extra days on average) and higher economic costs for operators.

At the request of this medium, giants such as CMA CGM Group have declined to comment further on the situation. Specifically, from the French shipping company, they referred to the statement published last Thursday in which they expressed “their deep concern about the recent events in the Red Sea” and announced the restructuring of their routes to and from the United States, the North of Europe or India. As Maersk made the decision to divert them towards the Cape of Good Hope in South Africa. For its part, the logistics giant Keuhne + Nagel also reported that 103 container ships had already been installed to sail around the African continent.

Do you recharge? Rate increase?

“This means 10 more days of transit and will influence prices since, for example, more than a third of the costs are represented by fuel,” highlights EAE Business School professor and Key Account Management manager at CEVA Logistics, Gemma Castellarnau. . , in conversation with La Información. For example, this expert explains, large shipping companies can apply “a war risk surcharge” to their clients and warn against “the lack of containers due to the increase in transit time.” In any case, in exporting powers like China, maritime transport rates to Europe are already rising in the heat of this crisis.

“The increase in times will increase delivery times, affecting the effectiveness of supply chains”, Javier Garat (president of the Spanish Maritime Cluster, CME)

For the president of the Spanish Maritime Cluster (CME), Javier Garat, “changing maritime routes to avoid attacks means increasing times” and remembers that the Suez Canal accounts for more than 10% of world trade by sea. Garat warns against “the increase in times that will increase delivery times, affecting the effectiveness of supply chains. All of this will undoubtedly put upward pressure on the prices of goods and services, just when inflationary pressures seem to stop.” In this sense, he urges “that the necessary measures be taken, within the corresponding institutional framework, to defend all vessels transiting the Red Sea.”

“There could probably be an economic imbalance if the situation drags on for a long time,” says Castellarnau. “This crisis affects the automobile sector, food, the supply of chips, exchanges between North Africa and Southeast Asia…”, adds the EAE Business School professor. This expert adds, this would even impact the use and availability of trucks in ports. “For example, it would affect the regular flow of Spanish ceramic exporters to countries like Saudi Arabia. All economic sectors, although as supplies extend further, the most affected would be retail,” Castellarnau closes.

Increased cost of traffic between China and Europe

In any case, the crisis is already beginning to have consequences. This week ‘The South China Morning Post’ echoed the statements of a shipping agent named Xia Xiaoqiang who claimed that “the freight rate at the beginning of January can double that of the beginning of December.” The newspaper, published in Hong Kong, also attributed the recent increase in the cost of the route between China and Europe to the proximity of the new lunar year and cited the case of the spot rate. Specifically, the shipment of a 40-foot container from the Asian giant to the Mediterranean had risen more than 70% compared to last month to $2,414. For routes to northern Europe, it reported an increase of 55% to $1,467 compared to mid-November rates.

“It is a strong blow to global supply chains and particularly harms the route between Asia and Europe,” Ángel Saz (ESADEgeo)

In this regard, Esade professor and director of its Center for Global Economy and Geopolitics (ESADEgeo), Ángel Saz, states that the sending of dozens of container ships means that “the time and monetary costs have multiplied between 5 and 8 times “. In addition, Saz cites information from Bloomberg about the increase in insurance, which at the beginning of this month amounted to only between 0.1% and 0.2% of the value of the ship’s hull and which is currently requiring 0.5%. “It is a strong blow to global supply chains and particularly harms the route between Asia and Europe,” summarizes this specialist who believes that it is time for Europe to demonstrate its ability to act. “I would be surprised if the situation could last more than two weeks without employing important effective measures,” he concludes, pointing towards the military option.

In any case, the rate increase seems guaranteed although for very different reasons. It should be remembered that four of the five main world operators of regular container ship lines (CMA CGM, Maersk, MSC and Hapag-Lloyd) 7 euros per conventional container on Hapag-Lloyd routes from Southeast Asia to Southern Europe . , up to 228 euros per Maersk 40-foot refrigerated container on voyages between Europe and West Africa.