Pellentesque non dolor vitae lacus fringilla consequat vel quis enim. Cras venenatis mollis neque in fringilla. In vitae
Pellentesque non dolor vitae lacus fringilla consequat vel quis enim. Cras venenatis mollis neque in fringilla. In vitae
The security dynamics have become aggravated in the Red Sea region owning to escalated animosities from Houthi insurgents reinforced by Iran, which leads to considerable intervention in maritime traffic and a consequential emergence in global costs. Hence, a collaboration including the United States, European nations, Bahrain, and Canada has come up with Operation Prosperity Guardian. The U.S. has already sent forces to the Gulf of Aden under the effect of this initiative. It strives to create a global partnership to guard commercial ships from the Houthi peril. While going with active strategies such as naval escorts may lead to operational delays, the exact framework and extent of the task force’s responsibilities are under development.
Crucial Impact of Trade:
Diversion: All prominent shipping lines have ceased Red Sea transits and redirected voyages around Africa.
Transit Time: Extra 10-14 days for Asia-Europe voyages, affecting pre-Chinese New Year shipments.
Cost Increments: Rerouting adds $3.4M per Asia-Europe round voyage owning to fuel and charter expenditure, leading to possible freight rate surges.
Container Scarcity: Rerouted vessels hinder empty container return to Asia, potentially Australian exports.
Suspension of Red Sea Transits: As of December 18th, roughly 100 vessels have been rerouted. The
major shipping lines have suspended their services through the Red Sea due to potential threats. As
a result, these suspended services are being rerouted through the Cape of Good Hope. Hapag and
Tailwind had to navigate their vessels back through the Mediterranean and are heading down the
West Coast of Africa.
Rising Costs: The rerouting is incurring higher costs for shipping companies. An extra four-week
round voyage around the Cape of Good Hope will add $3.4M in fuel and charter expenses to every
shipping service in the Asia-Europe Trade. Consequently, this increase in operational costs will
impact freight rates. However, we do not anticipate the new rate increases will reach the extreme
highs seen during the COVID-19 pandemic.
Shipping Rates Impact: From December 1st, 2023, shipping rates for Asia-Mediterranean routes
have surged. Rates increased after December 15 and will hike again on January 1, 2024. Despite only
12% of capacity being blanked in January, rates are expected to remain high due to ongoing Red Sea
disruption.
Strategic Significance and Impact on Australia: The diversion of vessels around Africa will absorb
the excess vessel capacity, slightly increasing rates in other trades. Some shipping lines scramble to
find suitable vessels to add to these services. Diverting vessels from blank sailings to meet the new
European schedule requirements may reduce Asia-Oceania trade capacity in the medium term.
Container Supply will be impacted: The shortage of containers will significantly affect the shipping
industry. Shipping lines in Asia have only three weeks of container stock. The redirection of vessels
around Africa will delay the return of empties from the EU. Bookings from Australia to the USA and
South America are expected to be limited in favour of Asian exports. The priority will be given to
moving empties from Australia to Asia due to shorter transit times.
Essential Information: The Shanghai Containerized Freight Index (SCFI) is a weekly index that tracks
the spot market freight rates from Shanghai. As of December 15, 2023, the SCFI has increased by
6.0% compared to the previous week, reaching 1,093.52 points. Shipping lines may limit bookings
to low-paying trades if the SCFI jumps by 25% or more.
Recommendations:
Stay informed: Closely monitor updates from shipping lines and IFCBAA regarding Red Sea
developments and potential disruptions.
Shanghai Containerized Freight Index (SCFI): Monitor for increases. Increases may indicate
potential booking rationalization by shipping lines, prioritizing higher-paying routes. This
issue may be temporary until some comparative normality of shipping line schedules comes
back into play, monitor closely
Information and Disclaimer
MPC International, is a Sydney-based strategic advisory firm, which supports IFCBAA with insightful
strategies and innovative solutions, to assist IFCBAA’s service initiatives for it’s members.
The International Freight Forwarders and Customs Brokers Association of Australia Limited(“IFCBAA”) is the leading independent body that represents international freight forwarders and
customs brokers in Australia.
IFCBAA and MPC International have collaborated on this Strategic Briefing initiative, with IFCBAA
identifying current member challenges and concerns in relation to this pressing issue effecting
international seafreight, to which MPC International has then researched and provided this
response.
The information, comments and data contained in this press release are provided as a guide only,
are current at the time of writing and are largely based on assessment and opinion, therefore the
content should not be treated as certain, definite or complete.
Transitainer WA Pty. Ltd. is a leading and in-demand logistics company in Australia, committed to providing professional and experienced freight forwarding, customs brokerage and sea freight services. You can trust us for our highly customer-centric services that propel you toward growth.
