The Red Sea crisis has gradually been interpreted by the market as a political event from a risk event affecting the shipping market. Based on this judgment, the probability of calming down in the short term is very small.
Why does the Red Sea conflict have such a big impact on freight rates?
The issue of safe passage in the Red Sea continues to disturb the global shipping market because it involves the Suez Canal, an important global shipping channel. The Suez Canal is a transportation artery connecting the three continents of Asia, Africa and Europe. The Suez Canal passes more than US$1 trillion in cargo every year, handling about 12% of the world's cargo transportation, 30% of container trade and nearly 10% of crude oil trade. Among them, the Bab el-Mandeb Strait is the throat of the Suez Canal. Ships passing through the Suez Canal must enter and exit the Red Sea through the Bab el-Mandeb Strait in the southern section of the Red Sea. The two passes are equally important to ensure the smooth flow of "the crossroads of world shipping". The area controlled by the Houthi armed forces in Yemen is adjacent to the Bab el-Mandeb Strait.
Relevant data shows that the number of northbound cargo ships passing through the Suez Canal has dropped from more than 35 on December 15 to only 22 currently, of which only one container ship of more than 8,000TEU passes northbound. In the short term, the Far East-Northern Europe supply chain is blocked, and there is a gap in the supply of effective transportation capacity. Coupled with the recent strong demand for freight, the supply of space is tight in early January, and the spot market price is also rising.
Major shipping companies around the world have stated that they will detour around the Cape of Good Hope, and the direct impact of the detour is to lengthen the voyage, increase the sailing time, and increase the voyage cost. Therefore, at first, the support for futures prices was considered more from the cost side. Since then, spot and spot booking freight rates have continued to rise month-on-month. In addition, merchant ships in the Indian Ocean were attacked and Mediterranean shipping encountered missile attacks while trying to resume navigation in the Red Sea, making it impossible to resume navigation.
The Red Sea crisis is the core contradiction. The detour is expected to last for some time. Airlines are currently more cautious and can only add a small number of ships to resume Red Sea routes through escort. Most of them are still evaluating the effectiveness and risks of escort.
