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March 1, 2024

Updated Red Sea Crisis Advisory: Schedule Reliability Hits New Low as Shipping Industry Continues to Adapt 

Updated Red Sea Crisis Advisory

With ongoing escalations in the Red Sea region, the shipping industry faces unprecedented challenges impacting reliability, operational decisions, and overall logistics strategies. The Red Sea crisis has forced shipping companies to take longer routes, resulting in increased costs and delays in shipment delivery. As per a UNCTAD report, by the first half of February 2024, 586 container vessels had been rerouted, while container tonnage crossing the canal fell by 82%. Uncertainty remains in the shipping industry as Red Sea disruptions continue to pose challenges. 

Schedule Reliability Declines 

In January, carrier schedule reliability across major ocean trade lanes experienced a significant decline, primarily due to disruptions caused by Red Sea diversions. These disruptions not only impacted the directly affected Asia-Europe and Asia-US East Coast routes but also had a substantial knock-on effect on other routes. As a result, global on-time performance dropped to 51.6%, marking the lowest level since September 2022. This data was highlighted in the most recent monthly report from Sea-Intelligence Maritime Analysis.

CMA CGM’s ‘Case-by-Case’ Red Sea Plan 

CMA CGM has reassessed and resumed transits through the Red Sea on a selective basis, emphasizing rigorous vessel evaluation before each passage and advising customers on the importance of cargo insurance, applicable also to Ocean Alliance partners. The company wrote on their website:” The CMA CGM Group has reevaluated the situation in the Southern Area of the Red Sea and the evolving conditions allow us to resume transit on case-by-case basis. The situation is being closely assessed for each vessel before each transit, routing choices therefore cannot be anticipated or communicated.” 

Fluctuations in Shipping Rates 

This week, the composite index for shipping rates saw a 5% decrease to $3,493 per 40ft container. Notably, freight rates from Shanghai to major global ports also experienced declines: Shanghai to Rotterdam fell by 7%, Shanghai to Genoa by 6%, Shanghai to Los Angeles by 4%, and Shanghai to New York by 3%, reflecting adjustments in global shipping costs. The Red Sea disruptions pose challenges to economic growth amidst global trade adjustments. 

Sailing Cancellations 

Notable cancellation rates for major East-West head haul trades, indicating operational adjustments in response to challenges, including a significant percentage of blank sailings across various trade lanes. 

Impact on Cargo Volumes 

The BIMCO market report from February 27th highlights a 21% decrease in cargo volumes in the Gulf of Aden and the Red Sea for the first seven weeks of 2024, largely due to fewer ships navigating these areas due to the Red Sea disruptions. This trend is linked to security concerns affecting merchant vessels’ decisions to bypass the region. Significant declines in ship transits, particularly for container ships, have impacted trade flow and logistics, raising costs and extending transit times for alternative routes. Uncertainty from Red Sea disruptions challenges economic expansion and global trade stability. 

Red Sea Disruption

Growth in Sea-Air Freight 

The recent data analysis by WorldACD highlights a significant increase in sea-air hub volumes, driven by the Red Sea shipping challenges. Specifically, the first seven weeks of the year showed over 50% year-on-year growth in tonnages from Dubai, Colombo, and Bangkok to Europe, with Dubai-Europe seeing the highest increase at 71%. Other hubs like Singapore and Doha also experienced growth, albeit at a lower scale. This trend underscores a shift in logistics strategies in response to the current maritime conditions. 

WTO’s Perspective on the Crisis 

The World Trade Organization’s chief economist, Ralf Ossa, commented on the moderate impact of the Red Sea attacks on global trade, emphasizing the adaptability of the shipping industry amidst challenges. Speaking at the WTO’s 13th ministerial conference in Abu Dhabi, Ossa said, “I think for now, the macroeconomic impact seems to be moderate. Freight rates have gone up but they are not nearly as high as they were at their peak in 2021 during the (Covid-19) pandemic.”  

New Shipping Line Introduction 

Launch of Folk Maritime in Saudi Arabia, focusing on intra-Red Sea feeder services, reflecting the evolving dynamics and responses within the shipping industry to the current situation.

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