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The Red Sea effect: Shippers weather freight rate storm

The Red Sea effect: Shippers weather freight rate storm
The Red Sea effect: Shippers weather freight rate storm
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The ongoing Red Sea crisis is wreaking havoc in the shipping world. Since October, many shippers and logistics companies have sat with their heads in their hands, asking this question, “When will freight rates improve?” 

Earlier this year, J.P Morgan reported that with 30% of global container trade transiting through the Suez Canal, the Red Sea shipping crisis is upending supply chains.

Governments like the UK have also taken initiatives to keep the supply chain resilient in the face of industry “shocks.” This prompted the UK to form the Critical Imports Council to safeguard the flow of goods. 

Shipping containers 

In a recent blog post, Peter Sand, Xeneta’s chief analyst, said: “Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this is an extremely challenging situation, and it is likely to remain so. “The market is still rising, and some shippers are still facing the prospect of being unable to ship containers on existing long-term contracts and having their cargo rolled.”

Ships have had to be routed around the Cape of Good Hope, which has led to longer transit times. 

ALSO READ: Shippers eye stability with flexible inventory strategies

How are current supply chain challenges impacting the ocean freight container shipping system as we approach the peak season?

“With the ongoing conflict in the Red Sea region, congestion at ports in the Mediterranean and Asia, equipment shortages, and shippers frontloading imports ahead of the Q3 peak season, the pressure within the ocean freight container shipping system is still at severe levels,” says Sand. 

The importance of the Red Sea in logistics 

The Red Sea is a crucial corridor connecting the Mediterranean Sea, the Indian Ocean, and beyond. Its strategic location gives shippers access to Europe, Asia, and Africa. The Red Sea route is the natural sailing route between these regions. 

Has there been any solution to a Red Sea alternative? Last month, Locate2u reported that the Port of Salalah in Oman has proposed a solution. It has introduced a multi-modal service option as an alternative to re-routing around the Cape of Good Hope.

NOW READ: Red Sea crisis: What is it doing to your business?

Photo Credit: Canva

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About the author

Sharl is a qualified journalist. He has over 10 years’ experience in the media industry, including positions as an editor of a magazine and Business Editor of a daily newspaper. Sharl also has experience in logistics specifically operations, where he worked with global food aid organisations distributing food into Africa. Sharl enjoys writing business stories and human interest pieces.

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