The maritime trade landscape is undergoing significant challenges due to the disruptions in the Red Sea, which are expected to continue into February. These disruptions have a global impact on trade, particularly maritime routes, including the crucial Suez Canal.
Impact on Asia to Europe trades
According to a report by Xeneta, the air freight spot rate from China to Europe has dropped significantly, contrasting with the ocean freight market, where rates have more than doubled.
Carriers’ diversion of ships from the Red Sea via South Africa’s Cape of Good Hope leads to schedule disruptions and increased operational costs.
This crisis affects manufacturers, with notable companies like Tesla and IKEA experiencing production halts and delays.
The challenges in ocean freight are prompting a shift to air freight for valuable, time-sensitive shipments.
Additionally, the upcoming Lunar New Year is expected to surge cargo demand and put further pressure on air freight rates.
Sea-air modal shift
The crisis is also influencing sea-air transport modes. Dubai is emerging as a strategic hub, likely to see a rise in ocean imports from Asia and air exports to Europe.
The sea-air mode via Dubai offers opportunities to mitigate costs.
According to Xeneta, on 14 January, the ocean spot rate from China to Dubai was USD 3485 per FEU dry container, which was USD 653 cheaper’ than the ocean spot rate from China to Europe.
Dubai to Europe air spot rate for general cargo in the same week stood at USD 1.17 per kg, a level similar to the same period in 2019.
Xeneta explains, “This translates into a Dubai transit sea-air cost of USD 1.61 per kg, just over three times the pure ocean freight rate from China to Europe (USD 0.52 per kg). The one-way transit time is approximately three weeks shorter than pure ocean transport.”
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Adaptive strategies by shipping companies
The decline in shipping volumes through the Suez Canal is causing economic worries for Egypt, considering the canal’s contribution of $9.4 billion to the nation’s GDP in the fiscal year 2022-2023.
In response to these disruptions, shipping companies are adopting alternative strategies.
Hapag-Lloyd, for instance, has introduced land service corridors linking key ports in the Middle East. French shipping giant CMA CGM is rerouting its NEMO service to Australia via Africa, bypassing the Red Sea. Similarly, Maersk has suspended operations in the Red Sea following vessel disruptions.
