Shipping companies take advantage of the Red Sea crisis to raise prices to increase their profits and market capitalization. This route, which passes through the Suez Canal, carries 12% of world maritime traffic but above all 40% of trade between Asia and Europe. Following Houthi attacks in the Bab el Mandeb Strait, container traffic has decreased.
According to Unctad (United Nations) calculations, it has fallen (in tonnage) by 45% in the two months since the attacks on the coasts of Yemen at the end of last year. A crisis that adds to the difficulties experienced by the Panama Canal, with water problems: traffic last month fell 36% compared to the previous year. Global trade (80% of goods travel by sea) is stuck.
But on an economic scale, the most striking thing is the disparity between the increase in costs suffered by shipping companies and the increase in freight charged to carriers. According to a report by the consulting firm Drewry, after the first two weeks of 2024, transits (in numbers of ships) through Suez decreased by 64% compared to the same period last year, from 138 to 50. During the same period , those who passed through the Cape of Good Hope (Africa) increased by 168%, from 77 to 206.
Well, as the journey is longer, the bill increases because you have to use more fuel and also pay extra insurance. Drewry analysts explain that there are two possible practices: either a similar speed is maintained and one more container is added. In this case the increase in total cost for shipping companies is only 3%, because the savings in Suez rights of way offset this increase. Or, as a second hypothesis, the speed is increased by five knots to reduce delays. In this case the bill for the shipping companies increases by 21%.
Even if companies took a middle course, the growth recorded in ocean freight over this period far exceeds that of the sudden costs caused by the Suez blockage and the change of routes. Carriers have complained repeatedly that the surcharge they have to pay per container on certain routes does not specify the concepts (a bit as if a restaurant bill only showed the total without the price of the dishes). Indeed, the WCI freight index has risen 150% between December 14 and January 18. That is, five times more than the extra costs faced by shipping companies (at most 21% more). If you look at the fares between Shanghai and Rotterdam, they even increased by 250%.
It is true that with respect to the pandemic the situation is different. There is no rebound in post-pandemic demand, nor have freight rates reached the levels of that time (which were double the current levels). Shipping companies have also learned their lesson and have more cargo capacity available.
But this increase in cost will have an impact on the logistics chain. The Japanese investment bank Nomura makes the following estimates. The effects on inflation may take between nine and twelve months. According to their calculations, the maritime traffic jam implies an increase in general inflation of two tenths for September of this year, with the price of the most affected products that could rise by up to 0.5%.
In Europe, the goods most subject to this increase are in the automotive sector, since brands depend on components that come from Asia and whose vehicles they assemble in factories in Germany or Spain. Meanwhile, the shares of shipping companies, which are still in losses in the last year, have soared between 20 and 45% since the crisis. Thanks to freight, they remain afloat.
