Red Sea crisis threatens global trade.

The shipping market has continued to be sluggish since 2023. In the past few months, shipping companies have been trying to push up freight rates, but they have no chance. Now the Houthis armed forces have brought the opportunity to raise prices to their doorstep.

Over the past month, affected by the "Red Sea Crisis", shipping rates have risen sharply, and detours have also caused weeks-long delays, making international traders miserable.

The Red Sea is an important waterway to the Suez Canal, a must-stop for some trade routes to Western Europe and the United States. About one-third of global container cargo and about 30% of cargo destined for U.S. East Coast ports pass through the Suez Canal. 60% of China’s exports to the EU pass through the Suez Canal.

Since early December, the top 10 container ship operators have rerouted about $200 billion in cargo that would otherwise have passed through the Red Sea.

Currently, container freight rates from Asia to Northern Europe have more than doubled, with freight rates exceeding US$4,000 per 40-foot container and US$5,175 per 40-foot container from Asia to the Mediterranean.

Not only European and continental routes, but other routes are also "following the trend" and rising. On January 5, the Shanghai Shipping Exchange, which updates the "China Export Container Shipping Market Weekly Report" every week, released the Shanghai Export Container Comprehensive Freight Index at 1896.65 points, an increase of 7.8% from the previous period (last week, the same below).

Shipping analysis agency Sea-Intelligence predicts that due to the detour around the Cape of Good Hope, the shipping industry has reduced its effective shipping capacity by 1.45 million to 1.7 million TEU, accounting for 5.1% to 6% of the total global shipping capacity.

Due to the reduction in effective transport capacity, logistics technology platform Flexport has previously warned that the Red Sea crisis will trigger a series of chain reactions. It is expected that the shortage of containers may be concentrated in Asian ports as early as mid-to-late January.

At the end of the year and the beginning of the new year, many domestic foreign trade companies are trying to rush shipments in order to collect payment as soon as possible and celebrate the New Year. The current Red Sea crisis not only affects the delivery schedule of foreign trade companies, but also reduces the enthusiasm of buyers for ordering.

Regarding the trade development situation in 2024, let us pay attention to the tensions in the Red Sea and any impact on the transit of the canal.