The crisis in the Red Sea region has sent the cost of ocean freight shipping spiralling as the market continues to react to vessels being forced to avoid the Suez Canal, according to an industry expert.

 

Ocean freight liner companies have already introduced a series of surcharges in response to avoiding the Suez Canal, stated Xeneta, a leading ocean and air freight rate benchmarking and intelligence platform.

 

AP Moller announced a Transit Disruption Surcharge (TDS), effective immediately, and an Emergency Contingency Surcharge (ECS) which will come into effect on January 1 pending negotiation, On Wednesday, MSC announced a similar raft of surcharges, it added.

 

Xeneta had predicted that the rates could increase by 100% following Houthi militia missile attacks on merchant ships in the Bab-El-Mandeb Strait - a gateway to the Red Sea and Suez Canal. And that prediction is now becoming a reality.

 

"The massive spike is already here. Ocean freight carriers are desperately trying to recoup the cost of sending vessels from the Far East to the Mediterranean, North Europe and US East Coast via the Cape of Good Hope rather than heading through the Suez Canal," remarked Peter Sand, Xeneta Chief Analyst.

 

"As we saw during the Covid years when there were huge disruptions in supply chains, if there is still an urgent need to get shipments moving, then businesses will have to pay an awful lot more to do so," he noted.

 

Data on the Xeneta platform indicates rates per FEU (40ft-equivalent shipping container) stood at $1,875 between the Far East and Mediterranean on December 14 – already an increase of 25% on the previous week.

 

However, shippers are being quoted upwards of $6,500 for high priority shipments on Mediterranean Shipping Company’s (MSC) Diamond Tier service.

 

"This price is not the market average yet, but it is what businesses will have to pay for urgent shipments. In the next 10 days or so, it may well become the market average," noted Sand.

 

"The Suez Canal is a critical artery for global trade so disruption caused by the missile attacks will not be solved quickly or easily and ocean freight shipping rates will continue to rise," he stated.

 

Shippers will also face Peak Season Surcharges (PSS) of $2,000 per FEU for Mediterranean bound cargoes from the Far East, while North Europe and US East Coast will command $1,000 and $600 respectively.

 

"The spike in rates is already here as a result of the Suez Canal diversion, but with Chinese Lunar New Year also on the way and the traditional increases in demand that brings, the cost of ocean freight shipping could grow even more dramatically," said Sand.

 

"Shippers should be aware that rates on all major trades could be impacted – even if they ordinarily would not transit the Suez Canal. Ocean freight carriers will announce all kinds of ‘recovery cost surcharges’ even for trades which are only indirectly impacted," he added.-TradeArabia News Service