Red Sea disruption continues

Red Sea disruption continues

The disruptions across the Red Sea continue unabated, with ongoing route diversions, prolonged transit times and associated delays resulting in an 80% volume reduction of maritime traffic across the Suez Canal.

However, whilst the continued shipping diversions have seen rates surge 200% throughout January and February, the overall impact on the shipping rates is far less than the unprecedented consumer demand experienced during the pandemic, which saw container rates increase by more than 900% throughout the period 2019 to 2021.

With the early rate surge already in decline, this more subdued environment can be partially attributed to the current slowdown in demand for goods manufactured in Asia. This has resulted in lower freight rates and cancelled sailings along shipping routes from China to the U.S. West Coast, signalling that the influence of China’s economy on supply chain prices may continue to be more pronounced than the impact of the Middle East conflict.

However, it is important to recognise that the medium to long-term impact of the Red Sea disruption remains to be seen. Currently the extended transit times are notable with an additional 14 days, plus war risk premiums have risen from 0.7 to 1% of a ship’s value, with the real possibility that these could increase further.


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