Crisis hard to solve! Freight is blocked, shippers are under pressure, tariffs will see the light of day after the first of the year.
The global political and economic impact of the Red Sea crisis continues to grow. Recently, a number of shipping companies have warned that Houthi attacks on merchant ships, the involvement of Hezbollah in Lebanon, and exchanges of fire between Iranian militias and United States forces in Iraq have the potential to evolve into a regional conflict.
Meanwhile, the issue of rising freight rates due to ships detouring around the Cape of Good Hope is beginning to emerge. Costs for shippers have increased and there is news that some European customers have asked to postpone shipments. Inflation-induced consumer austerity and pay rise strike protests are hitting the supply chain and demand side.
Industry insiders believe that the key will depend on the resumption of work in Asia after the New Year and the timing and volume of orders from Europe and the US. A real change in freight rates could come as soon as mid to late March.
Based on the crew's personal safety considerations, on behalf of the global more than 20,000 crew of the Nautilus large crew union recently announced that from 19, if the crew in the United Kingdom and the United States associated with the ship to work, they will receive double the daily wage during the most dangerous areas through the Red Sea. In addition, crews will have the option of disembarking before reaching the most risky areas of the Red Sea.
Prior to this, shipping companies such as Evergreen and Yang Ming had already made salary adjustments for their crews. Zheng Zhenmao, chairman of Yang Ming Marine Transportation, said that the duration of the Red Sea crisis is difficult to predict, and the information in the shipping market is confusing, which once triggered the anxiety of many cargo owners to repeat their bookings. At present, the container shipping market is still facing the problem of excess capacity. Yang Ming Marine Transportation adopts a prudent strategy and is not considering actively chartering vessels to capture the market as some other shipping companies do.
The Red Sea crisis could take on new dimensions at any time, raising fears that it could turn into an ethnic or religious war. 2024 continues to be a year of geopolitical, climate change and inflationary interest rate hikes, presenting both opportunities and challenges for the maritime industry. The opportunity lies in the industry's ability to earn the extra revenue generated by the crisis; but at the same time, market conditions are more unpredictable, with geopolitical tensions and rising raw material prices pushing up oil prices and prices, impacting the demand side.
According to foreign media reports, the Red Sea crisis has put pressure on domestic exporters with delays and rising costs, which could have a knock-on effect on some suppliers with slim margins. Some European customers have already spread the word, saying they have asked to suspend shipments and wait for the situation to clear up before making decisions.
Asia's year-ago shipments are mainly concentrated in January, and with the approach of the Lunar New Year on February 9, many factories have been shut down for vacation. Forwarding industry sources revealed that the number of bookings in February has been reduced. It is expected that during the Lunar New Year or 2-3 weeks after the year, container ships will focus on returning to Asia to load cargo. In order to cope with this situation, some shipping lines have already started to reduce prices to attract more cargoes in preparation for shipments during and after the Lunar New Year.
As for whether shipping companies can make a killing in this wave of the Red Sea crisis, a number of shipping companies and freight forwarding industry insiders believe that the key depends on the resumption of work in Asia after the New Year as well as Europe and the United States to place an order for the time and number. They pointed out that the continued stability of high freight rates need enough cargo volume to support. Therefore, the earliest may be in mid to late March to really see the market change.
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