Container freight rates are continuing to spike upwards. The latest numbers from the freight market-place Freightos, assert that during the past week spot freight-rates on the Asia-Northern Europe route jumped 23% whilst on the Asia-Mediterranean route they have risen 24%. On these trades prices are roughly where they were in early January. According to the Freightos numbers, rates on trans-Pacific routes and other trades have also shot-up over the past week.
Possibly there are a number of factors behind the increase. Interest rates are falling in a number of western economies and this might be supporting consumer demand, although evidence for this is mixed. There is also some speculation that retailers are rebuilding inventory, triggering suggestions that there might be a very early ‘peak season’. Yet the Red Sea Crisis continues to be the major driver of higher prices. However, there is the emerging possibility that the crisis might end.
There are attempts to agree a cease-fire between Israel and Hamas, with the US Secretary of State seeking to drive through a deal. At present Hamas is resisting but there is clearly a strong possibility that some sort of cessation of violence could take place in the next few days or weeks. This ought to have an impact on the Red Sea Crisis. The reason that the Houthis give for firing missiles at ships is to put pressure on the West to stop supporting Israel. The Houthis clearly also have other motives connected with the Houthis’ Iranian allies and this makes it far from certain that the Houthis will stop firing missiles at ships.
None-the-less, it is conceivable that container shipping lines will perceive that it is safe to resume passage through the Red Sea and the Suez Canal in the near future. This is very likely to result in a wave of new shipping capacity hitting the market and this ought to drive-down prices, possibly quite suddenly and quite violently.
Author: Thomas Cullen
Source: Ti Insight
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