As port congestion and a surge in demand add pressure on top of Red Sea diversions, analysts suggest that container freight rates might once again reach the record levels seen during the pandemic.
Lars Jensen, CEO and Partner of Vespucci Maritime, spoke at TOC Europe this week about the current challenges. He explained that diversions from the Red Sea, with ships sailing via the Cape of Good Hope to avoid conflict, have absorbed all available capacity in the market, leaving “literally zero excess capacity.”
“There is no way we could handle any additional crisis right now. Over the past month and a half, we’ve faced significant congestion issues,” Jensen stated.
With some vessels waiting up to a week at major ports and severe congestion in the Western Mediterranean, Jensen warned that we might be heading towards a situation similar to the pandemic. At its worst, port congestion during the pandemic removed 14% of capacity from the supply chain. Now, with a massive demand surge, the already strained supply chain is under even more pressure.
“This might be an early peak season. If that’s the case, the demand surge might ease by early July, offering some relief or at least stabilizing rates. However, if the demand remains strong, we could see rates attempting to reach the pandemic record levels,” he said.
When asked by Seatrade Maritime News about the likelihood of this scenario, Jensen said it was difficult to predict with certainty.
Similarly, analysts at Sea-Intelligence suggest that if additional sailing distances around the Cape of Good Hope are considered, rates could surpass pandemic levels. Alan Murphy, CEO of Sea-Intelligence, noted that the increased sailing distances weren’t a factor during the pandemic, which could drive rates even higher.
“If rates per nautical mile match those during the pandemic, we could see spot rates of $18,900 per FFE from Shanghai to Rotterdam, $21,600 per FFE from Shanghai to Genoa, and $2,200 per FFE on the return route from Rotterdam to Shanghai,” Murphy said.
Offering some relief to shippers, Drewry’s World Container Index (WCI) was up just 2% week-on-week as of June 13, standing at $4,801 per FEU, which is a moderation from the recent double-digit percentage weekly increases.
Source: https://www.seatrade-maritime.com/containers/warning-container-freight-rates-could-hit-pandemic-record-highs