The extremely high container rates have been the main topic within the interior design industry for months. After a turbulent six months, all importers hope to be in somewhat calmer waters. So far, this is not the case. For instance, eyes are currently focused on the Cape of Good Hope. Due to extreme weather, the market is holding its breath while there is record demand for sea freight containers.
Problems plan B
Since the unrest in Yemen, container shipping companies have been avoiding the Red Sea. The alternative route is via South Africa. However, dangerous weather conditions have prevented container ships from sailing around the Cape of Good Hope. Data from LSEG Shipping Research show that last week no ship passed the tip of the continent. This adds to the delays and disruptions caused earlier by the Red Sea diversion.
Fabrice Maille, Global Head of Shipping & Agriculture at LSEG, said, "We have a complete stop at the Cape of Good Hope for container ships. There is no significant change in traffic on the Red Sea so far, but several container ships have made a turnaround and/or are waiting off the coast of Durban."
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Waves up to 10 metres high
Waves around the coast can reach up to 10 metres high. This is linked to a powerful cyclone that hit the region last week. Last week, on Tuesday 9 July, a CMA CGM container ship was hit by the storm. The vessel 'Benjamin Franklin' (18,000 TEU) lost 44 sea containers in the process. Another 30 containers were damaged. Despite the loss, the company confirmed that there were no crew injuries, no pollution and no significant damage to the ship, which remains fully seaworthy.
Houthis continue to strike
Despite the ongoing unrest in the Middle East, container ships are still sailing in the Arabian Sea. Less than a week ago, ships belonging to Maersk and MSC came under fire. Meanwhile, the Yemeni Houthis have claimed the attack. Not only has this route become more dangerous, but costs have also risen. In early 2024, tariff increases were implemented by the Suez Canal Authority. Since January 2024, tariffs have increased by 15%, following an earlier 6% increase.
To the surprise of many, Maersk was surprisingly positive about the first half of the year. "We started the year on a positive note with the first quarter developing exactly as we expected. Demand is trending towards the higher end of our market growth forecast and conditions in the Red Sea remain anchored," said Maersk CEO Vincent Clerc.
Shanghai to Rotterdam
Drewry's World Container Index, a joint index calculated on the basis of current rates applicable to major trade lanes, rose 1% to $5,901 per 40ft container last week. This is an increase of 297% compared to the same week last year. The latest Drewry WCI composite index of $5,901 per 40ft container is 43% below the previous pandemic peak of $10,377 in September 2021, but is 315% higher than the average rates of $1,420 in 2019 (before the pandemic).
Rates from Shanghai to Rotterdam are stable. In one week, fares fell from $8,056 to $8,048, which is almost negligible. Conversely, rates from Rotterdam to Shanghai fell 2% to $631 per 40ft container. Rates from Rotterdam to New York also fell 1% to $1,955 per FEU. Drewry expects freight rates to remain high until the end of the peak season.
Sea freight container demand at record high
Global demand for ocean freight containers reached a record high in May, according to recent data from Xeneta and Container Trades Statistics. In May, 15.94 million 20-foot containers were transported by sea, surpassing the previous record of 15.72 million from May 2021. Volumes so far this year are just under 74 million TEUs, up 7.5% from the first five months of 2023.
"More containerised goods are being transported by sea than ever before, while available capacity is affected by diversions around Africa due to conflicts in the Red Sea and severe port congestion in Asia and Europe," said Emily Stausbøll, Xeneta Senior Shipping Analyst. "This is a 'perfect storm' pressing on ocean supply chains. This has led to the chaos of recent months."
Problems plan B and Houthi attacks continue