Shippers are counting the cost of war

15.01.2024

Verifiable costs for transiting the African Cape rather than the Suez Canal are around US$1,000 per box according to Xeneta chief analyst Peter Sand, who was responding to questions on how western bombing had changed the maritime supply chain seascape.

Speaking after coalition forces bombed targets in Yemen in an effort to neutralise the threat to merchant shipping in the Red Sea, Gulf of Aden and Gulf of Oman, US has effectively escalated the regional war, admitted Sand.

“Tensions were already high now they are a bit higher,” he told Container News. He said container shipping would not return in any numbers to the Suez Canal until they are convinced that it is safe.

That means if disruptions last for longer than three months carriers are likely to add ships to loops and rework services to meet the new reality, less than three months of disruption will see services head for the cape, but will be cut short at either end.

With rates edging up to around US$5,300-5,500/TEU this week, Sand believes that the disruption to supply chains will have a disproportionate effect on smaller shippers who are less able to rapidly react to the chaotic nature of the Far East to Europe trades, than the more resourced shippers and forwarders.

In a ‘back of the envelope’ calculation of the extra verifiable costs of transiting the Cape, Sand said that while there would be savings in insurance and Suez Canal costs of around US$1.5 million a ship, the extra fuel for the longer journey, 20 days on a round trip, will add US$1.2 million. With charter rates at US$60,000/day that would add a further US$1.2 million and other expenses will see verifiable costs increase to US$2.5 million per ship, per round trip, translating to around US$1,000/container, Sand said.

Global Shippers’ Forum (GSF) director James Hookham believes there should only be a month of schedule disruption, but as services are developed and ships added to loops the timings should settle down to a comparatively normal system, albeit with longer transit times.

“Overnight action [by coalition forces] have effectively declared the whole region a war zone for the foreseeable future,” claimed Hookham, adding that, “shippers should prepare for extra costs.”

However, the disruption should not be on the scale of the pandemic. “There will be a period of realignment, but assuming there is no wider escalation there should be a one-off hit to scheduling,” said Hookham.

As a result, rates should settle and because we are aware of the limits of this disruption it should be possible to see the boundaries of the disruptive nature of the Middle East conflict.

According to the GSF, many shippers see the end of Chinese New Year, which starts on 10 February and ends on 17 February, as the start of the contract renewal season.

Hookham urges shippers to see through the “fog of war” and “even though the military situation may become worse, ships are safe going around the cape.”

Fire on boxship in Houston kills two seafarers, injures one

09.01.2024

Two seafarers died and another crewman was hurt after a fire broke out in the engine room of the 2,174 TEU container ship Stride.

COSCO Shipping Lines had chartered Stride from Danaos Corporation to operate a service connecting the US port Houston with Guatemala, Honduras and Colombia. The service, launched in June 2021 to target reefer cargoes, is jointly operated with CMA CGM, which contributes two chartered vessels.

The fire is said to have occurred while containers were being loaded at Barbours Cut Container Terminal, and Port Houston Fire Department was alerted to the incident around 3.30 am local time on 8 January. The fire departments of Baytown and LaPorte also responded to the incident.

The three seafarers were hurt while trying to put out the fire, which reportedly started while the 1997-built Stride was being bunkered. By 7.32 am the same day, the flames were put out.

Two of the crewmen were pronounced dead at the scene, while the third seafarer was airlifted to a Houston hospital, where he remains in critical condition.

Port Houston said the flames have since been contained, but the area will be monitored for 24 hours per protocol.

The cause of the fire will be investigated.

Harris County Judge Lina Hidalgo shared a statement following the incident, saying, in part: "At this time, Harris County Pollution Control Services has confirmed that there is no threat to the surrounding community. Harris County extends our deepest to the deceased, the injured, and their families."

Shippers accuse carriers of price gouging

29.12.2023

Shippers and forwarders are becoming increasingly concerned about carrier price gouging on the Asia to Europe services citing massive increases in charges that are being merged into a single charge from January.

According to one forwarder, who wanted to remain anonymous, carriers are citing increases for a peak season surcharge, increased fuel charges and security surcharges that have all been created due to the Red Sea shipping crisis.

“In December we were being quoted $1,400/FEU by carriers from January that will be $5,200/FEU and $4,000 for a 20ft, and we are being told to expect $12-15,000/FEU after Chinese New Year at the end of January,” said the forwarder.

He said it was uncertain how these charges were going to be levied at this point, whether the security surcharges would be levied for vessels heading around the Cape, or if extra fuel charges were still being made for vessels still transiting the Suez Canal.

December freight rates have all been honoured, said the forwarder, but Maersk announced on 24 December that it will resume services through Suez.

“As of Sunday 24 December 2023, we have received confirmation that the previously announced multi-national security initiative Operation Prosperity Guardian (OPG) has now been set up and deployed to allow maritime commerce to pass through the Red Sea / Gulf of Aden and once again return to using the Suez Canal as a gateway between Asia and Europe,” said a Maersk advisory.

However, the forwarder remained unconvinced: “There is no peak season, the shipping lines have created a peak season,” he claimed.

That is a view that was supported by Xeneta’s chief analyst Peter Sand, who told Container News: “I don’t see a capacity crunch, the market is stretched with carriers going around the Cape [of Good Hope] but to see a capacity crunch we would need to see Suez and Panama close.”

Sand pointed out that in the pre-Covid days an Asia to Europe loop consisted of just eight ships, today some loops have 14 vessels deployed.

Carriers are deploying a number of tactics to limit capacity, including adding extra port calls, slow steaming, blanking sailings and using the Cape to extend journeys, but with the number of new vessels being deployed and the level of demand there is “ample capacity,” said Sand.

Red Sea attacks on shipping have caused vessels to divert around the African Cape to avoid the regional conflict in the Middle East, prompting some observers to warn of higher rates and a shortage of capacity.

Global Shippers’ Forum director James Hookham was more guarded on his view of the current situation, saying that it was clear that some ships will be delayed after diverting via southern Africa, but these ships remain on the water so it’s unclear how this will play out.

Like the forwarder, Hookham suggests that the peak season claim by the lines remains fanciful: “Demand is still flat, global trade is in decline if anything,” he said, while also pointing out that the carriers are running more ships, “But those ships’ utilisation rates are low, at around 70%, it’s like running a train service, the trains are often operated with a few people on board.”

Carriers still sending ships via Suez

22.12.2023

Vessel tracking shows over 80 container ships still transiting the Red Sea and Suez Canal even after the raised threat from the Houthi Movement, which has warned it will target vessels connected to Israel.

Houthi leaders have reportedly said that they would target shipping until Israel allows aid into Gaza and stops bombing its population, with the latest news from the UN that a vote will take place on a ceasefire. Although the UN proposal is supported by the US, it remains to be seen whether this will be enough to stop the Houthi group from targeting commercial shipping in the Bab al-Mandeb strait.

With a large number of container ships still operating in the region, many from the top ten carriers, including COSCO, ONE, Wan Hai, Maersk, CMA CGM and MSC and some ultra-large container vessels (ULCVs), the Houthis will not be short of targets.

Container News contacted the three largest container vessel operators, all of which have vessels in the Suez Canal or the Red Sea, as tracked on VesselsValue AIS.

A spokesman of CMA CGM said the French shipping company “is working in close co-operation with the appropriate authorities and is working on the appropriate safety measures with them.”

He pointed out that while it would be difficult to outline the security measures under discussion, the actions being taken are to protect crew, vessels and freight on board its ships.

Maersk also responded to requests for clarification following its announcement, like CMA CGM and others that all its vessels would be re-routed until the Suez Canal route was again safe.

Pointing to Maersk’s 19 December statement which said, “Having monitored developments closely and retrieved all available intelligence, Maersk has decided that all vessels previously paused and due to sail through the region will now be re-routed around Africa via the Cape of Good Hope for safety reasons.”

However, a Maersk spokesman also highlighted that some of its vessels operate under the trading name of Maersk Line Limited, which handles freight for the US Government and “is not part of Maersk Line’s overall offering”.

The US has assembled a multi-national naval force to protect commercial shipping in the Gulf of Aden and Bab al-Mandeb, in what it calls Operation Prosperity Guardian. Greece and Denmark are the most recent additions to the force, which includes Spain, Italy, the United Kingdom, Canada, the Seychelles and others.

Air Force Maj. Gen. Pat Ryder at a Pentagon press conference said, "It's very important to understand that the Houthis aren't attacking just one country, they're really attacking the international community."

He added, "They are attacking the economic well-being and prosperity of nations around the world. So, in effect, they really become bandits along the international highway that is the Red Sea."

Greece has sent a frigate to join the international force with the Greek defence minister, Nikos Dendias, saying, "The frigate will participate in the multinational operation 'Prosperity Guardian', for the protection of merchant ships, the lives of seafarers, and the global economy."

Missile attacks threaten global supply chain crisis at Suez Canal: Two boxships attacked, one on fire

15.12.2023

Missile and drone attacks by Houthi militia on merchant ships passing through the Red Sea and Gulf of Aden could trigger a global supply chain crisis.

The latest attack was reported today (15 December) on the Liberian-flagged 14,993 TEU container ship Al Jasrah, operated by Hapag-Lloyd, in the Red Sea. The vessel sustained damage from the missile attack as it was sailing through the Bab al-Mandab strait, causing a fire on deck and a container to fall overboard, said the British maritime security firm Ambrey.

Another attack was reported yesterday (14 December), when a missile was fired at the 10,100 TEU container ship Maersk Gibraltar. The missile did not strike the ship, which was sailing from the port of Salalah in Oman to the port of Jeddah in Saudi Arabia.

This follows a string of attacks including missile strikes on a Norwegian-flagged vessel in the Bab el-Mandeb Strait and a container ship operating between Asia and the Mediterranean. On 12 December, a vessel operated by shipping company Ardmore came under missile attack in the Red Sea.

Peter Sand, chief analyst at Xeneta, an ocean freight shipping data and intelligence platform, believes the situation could have serious consequences for global supply chains.

"All ships transiting the Suez Canal must sail through the Red Sea and Gulf of Aden and the Houthi militia has made clear that any vessel is a target. I do not believe the Suez Canal will close, however, if there are further significant escalations then we cannot rule it out, even if it is just for a few days," he said.

Sand mentioned that a closure of the Suez Canal could have a severe impact on the global shipping industry, recalling the Ever Given incident and its consequences. "The ocean freight industry has been deeply scarred by Ever Given and is frankly terrified of any situation which threatens the closure of the Suez Canal," he pointed out.

More than 50 vessels transit the Suez Canal every day, carrying billions of dollars of goods to North Europe, the Mediterranean and North America East Coast. Houthi militia in Yemen, which has stated sympathies with Hamas and according to the US Government, are being armed by Iran, has claimed the missile and drone attacks on merchant ships are in response to the conflict in Gaza.

With ongoing restrictions in the Panama Canal due to drought, the latest situation in Suez could not come at a worse time for the ocean shipping industry, according to Xeneta analysis.

Sand said, “We are already seeing ocean freight liner operators and owners choosing to reroute vessels away from the Red Sea and Gulf of Aden region. Due to the importance of the Suez Canal to global supply chains, even a small disruption can have big consequences.

“The main alternative is to sail around the Cape of Good Hope, which adds up to 10 days sailing time for services from Asia to North Europe and East Mediterranean.

“We may also see the cost of moving freight by ocean increase dramatically. Depending on the scale and duration of any disruption at the Suez Canal, we could see ocean freight shipping rates increase by anything up to 100%.”