Freight News, Industry Issues, International, Shipping News

Capacity crunch leads to ocean freight code red

Freight rates have skyrocketed and a severe capacity crunch has been reached in international ocean freight

A code red warning has been issued to all ocean freight markets except intra-Asia, with a capacity crunch caused by high demand and network bottlenecks returning the freight rate to similar levels of the Covid-19 pandemic. 

The Red Sea is a critical route for 30 per cent of the world’s container traffic, but conflict in the Middle East has seen a dramatic reduction in ships utilising the corridor. 

Attacks on several container vessels have dropped traffic volume through the Suez Canal and Bab El-Mandeb Strait by half, which has resulted in a 100 per cent increase in navigation via the Cape of Good Hope in south-west South Africa – as per World Bank. 

Part of the soaring freight rates can be attributed to the added fuel and emissions costs incurred by taking longer routes to avoid the Red Sea. 

The average price of Asia to north Europe stands at USD $7898/40’. 

All ocean carriers have imposed general rate increases (GRIs), peak season surcharges (PSS) and an array of other surcharges in response to the increases, however allocation cuts are also being made on long-term rates. 

Hapag Lloyd CEO Rolf Habben Jensen believes the current rates will not persist into the long-term. 

“Container rates have reached corona levels, and shipping companies’ capacity is stretched to the limit at the moment due to bottlenecks and high demand,” Habben Jensen says. 

“I still think it’s a temporary thing, then we can argue about how many weeks it will last – but I don’t think it will last until the end of the year.” 

Airfreight levels are also elevated – especially on routes impacted by the Red Sea situation.  

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