Chinese New Year
Every year, Chinese holidays determine the behavior of all participants in the transport market. The ongoing Chinese Lunar New Year falls this year from February 9 to 15 as a statutory holiday, but traditional ceremonies continue until February 24. With the beginning of January, we observed a significant accumulation of shipments and a greater number of orders. And by the end of January, almost 80% of factories in China were already closed. The situation required compensating for tasks that were usually completed in 3-4 weeks, up to 1 week.
Attacks in the Red Sea
Apart from the cyclical increase in demand for container freight from the Far East, one of the factors that significantly affected the functioning of the supply chain was the terrorist attacks in the Red Sea region faced by shipowners. Huti attacks on merchant ships caused multiple increases in sea freight prices in the relationship from China to Europe. At the end of November, the rates for transporting a 40-foot container to Gdansk were under $1,000. At the time of the biggest cargo pile-up before CNY, rate levels from major Chinese ports were up to six times higher. Shipowners in a sudden crisis situation raised their prices overnight, and sometimes by the hour. They introduced emergency fuel surcharges or freight supplements, related to the need to change the ship's route and carry out deliveries through the Cape of Good Nadzien. It was hard to predict what the next day would bring.
The conflict in the Red Sea, which has lasted for more than 60 days, does not allow us to think about a quick return to normality in maritime transport. There is no improvement in security, and all the major shipowners are directing their ships on a route around the Cape of Good Hope, opting for a longer and more expensive voyage around Africa to avoid terrorist threats. Sailings to Europe have been extended by an average of 14—20 days, and the connection network is constantly changing to better adapt to the prevailing situation. Shipowner Maersk announced that deliveries by alternative route will continue until at least the second half of this year. There were also difficulties with the availability of empty containers in China, India and Europe (for export). The situation is reminiscent of the time of the pandemic, when problems with the global shortage of containers were common. Currently, the owners of ONE, Hyundai and Maersk are experiencing this in particular. MSC, COSCO and Evergreen have invested in the production of new containers over the last three years, so they do not have major problems with the availability of equipment at the ports of loading.
Alternative transport solutions
Faced with the problems described, broadcasters are looking for an alternative in transport and opt for rail and air solutions, which were particularly popular in January. Although these are still more expensive types of transport, they are more reliable from the point of view of timely delivery. During CNY, there were also slight delays on the railway, but not longer than 4—7 days. This was due, for example, to the earthquake in Kazakhstan last month, the renovation of the railway network, the large supply of trains before CNY, or local weather conditions (snowstorms, strong wind).
Forecasts for maritime transport
The lengthening of maritime transit in imports and exports causes significant delays in cargo deliveries, leading to production problems for companies and, consequently, possibly to an increase in retail prices of various goods and materials. The crisis in the Red Sea may persist for a long time, which will have long-term consequences for the entire world trade and economy. Not only the transport market, but also markets in other sectors, do not expect a rapid normalization of the situation in the Red Sea, as there are still fears of an escalation of conflict in the region. An example of a company that bypasses the Suez Canal trail is Shell. Experts warn that it could lead to an increase in the retail price of oil and, consequently, to an increase in inflation.
In the coming weeks, we should expect a slight stabilization of sea freight prices, which is a typical situation in the post-CNY period. However, shipowners who want to maintain relatively high levels of revenue are trying to respond to declines in demand on an ongoing basis. They then announce the so-called. blank sailingAs the Ocean Alliance announced blank sailing on the Far East—Northern Europe line in weeks 12, 15 and 17.
Our entire team is constantly monitoring the dynamically changing situation. We are looking for new solutions that will best secure our customers' supply chains. Therefore, we encourage everyone to verify the current situation and, if necessary, consult with commercial and operational supervisors.
