Attacks on container ships are becoming way too familiar. According to FreightWaves, container ships, and their crews have become exposed to risk in the Red Sea. The greater the danger, the higher the shipping rates. Most shippers will not be willing to use certain routes. Those willing to still use them will do so at a higher cost. Some have even had to take other, longer routes.
The general impact of the attacks
The attack's impact is quite clear. A good example is the most recent attacks. They meant that there would be a need to use diversions. They also caused route delays. The share price of ocean carrier Zim spiked by 18%. Shares of Hapag-Lloyd went down 16%. Maersk's stock closed up 8%. It is just an example of how bad the situation is. Wars, viruses, and weather disasters have a big impact on shipping just as much. Many container ships use the Suez Canal. If they avoid the Suez Canal, the market will tighten up, increasing the rate.
More container ships will have to use alternative routes. The one available is the much longer route around Africa's Cape of Good Hope. The only question is whether these diversions will now have to become new routes. Longer routes will mean there will be a need for more ships to sustain the supply chain. Maersk, Hapag-Lloyd, and MSC have been victims of these attacks. They have instructed their ships that pass through the Bab al-Mandab Strait to pause for now. They will have to go around the Cape of Good Hope.
Impact on the Asia-Europe and Asia-US markets
The two are the world's largest container shippers. The Asia-Europe market is directly affected by the issues at the Bab al-Mandab Strait. The Asia-US market is feeling more impact than it would normally. The Panama Canal also had issues with low water volumes. This means that large container ships had to divert to the Suez Canal. Now, some of the ships may need to change routes once again. Moving to the Suez Canal meant covering more distance. Moving again to the Cape of Good Hope will mean even much more distance to cover.
Asia-Europe rates are rising in December
Most Asia-Europe contracts are up for renewal on 1 January. Spot rates were weak in November and October. If they don't improve, the contract rates will be low. Spot rates are relatively up this month. Even before the security issues, they were looking better. The spot rates aren't good, but they are better than the numbers from the past two months. They will give carriers a boost when it comes to negotiating for the contract rates.
The winners of the attacks
The recent incidents did not bring doom and gloom. There will be some winners from the bad situation. There will definitely be a need for more ships to cover the longer routes. If the problems spill into 2024, there will be even more demands to meet the capacity. Such incidents also help sort out the issue of overcapacity. Shippers will have no choice but to get more ships to handle the movement of containers.
