The crisis in maritime transportation on the Red Sea route due to Houthi attacks is deepening the extent of the problems in the global supply chain. Drewry’s World Container Index, which started to rise after the attacks began, has accelerated.
While the increase in container freight accelerated in maritime transportation, dry cargo freight also increased despite the dead season. While some cargoes are shifting to road transportation, prices are increasing in this mode of transportation.
Container freight was on the rise as giant shipowners such as Maersk, MSC and Hapag Lloyd, which dominate global shipping, switched their routes from the Suez Canal to the Cape of Good Hope on their routes between Asia and Europe. In the World Container Index of Drewry, a maritime research and consultancy company, container freight for 40 containers increased by 61 percent in the 7-day period that started on January 4, after increasing by 9 percent for two weeks in a row, and reached USD 2,670.
Some giant shipowners are planning to implement the actual hikes this week. French carrier CMA CGM announced the introduction of the Peak Season Surcharge (PSS) from January 10, 2024. This surcharge will remain in effect until further notice. Shipments from southern Turkey, mainly from the ports of Mersin and Iskenderun, will be subject to the surcharge. This PSS will apply to cargo destined for Northern Europe, including Ireland, Scandinavia, the Baltic States and Poland. The surcharge will apply to all cargo types, while the PSS will be $110 per unit. Shipments to the United Kingdom will be subject to a surcharge of $127 per PSS unit.
Dry cargo prices up despite the dead season
Cihan Ergenc, President of the Turkish Shipowners’ Association (TAB), said that the tension in the Red Sea also affected the dry cargo ship market. Ergenç said, “As dry bulk shipowners, we were actually expecting a downward correction in the freight. Normally, since we are in the dead season, the freight should fall, but on the contrary, the markets have revived.” The Baltic Dry Index (BDI), which was around 2,000 points on December 21, closed last week with 2,113 points. Cihan Ergenc reminded that demand is low due to the slowdown in the global economy and warned, “Dry cargo shipowners should be prepared for correction.” BDI fell as low as 2,088 points yesterday. However, it is stated that the prolongation of the crisis in the Red Sea may start a rise in the BDI again.
International Transportation and Logistics Service Producers Association (UTIKAD) Seaway Working Group President Yüksel Kahraman told our newspaper last week that the problems in the supply chain and the increase in freight disrupted the calculations of buyers abroad, so some export cargoes started to be postponed. Kahraman, whom we asked about the current developments yesterday, said that the problems in the Red Sea may be reflected on the land and airway after the sea, and that the freight may increase in these transportation modes.
Fatih Tas, Export Chief of Kanca, one of the automotive supply industry companies, said, “After the Red Sea crisis started, 3 weeks delay in transit times was reported in our two important import transportation. In addition, there was a rapid increase in container freight. It seems that the increase in containers will start to be reflected in road transportation freight rates. Because some cargoes started to shift to the highway,” he said.
Alp Kaan Özkan, Operations Manager of Istanbul-based Pentagram Logistics, drew attention to the increase in road freight and said, “We have been observing a 20 percent increase in road freight since the beginning of January. We think that the Red Sea crisis has an important share in this, as well as the new year hikes.”
One in five ships avoided Suez Canal
Houthi attacks on merchant ships continued over the weekend. One in five ships chose to avoid the Suez Canal on their routes between Asia and Europe. The President of container consultancy Vespucci Maritime said that the threat to shipping in the region has not changed, so it can be expected that carriers to continue their African tours with the usual exceptions.
There may be a new container crisis
Speaking to EKONOMİ, industry officials said that the problems in the Red Sea could cause a new global container crisis like the pandemic. Officials said that transit times have started to lead to late arrival of cargo and equipment imbalance. Stating that all contracts and calculations have been thrown out of whack, logistics sector representatives pointed out that container prices have already started to increase.
Turkey’s foreign trade is being hampered
The impact of the tension in the Red Sea on the Turkish economy is increasing. Increasing difficulties in raw material imports have pushed up prices in the domestic market, while some export orders have started to be suspended by their buyers abroad. Although it is thought that the prolongation of this crisis may cause some orders in the global supply chain to shift to Turkey as in the pandemic, there has been no concrete development in this regard yet.