Ocean Shipping Rates Surge as Red Sea Attacks Continue

Average costs to ship a container have more than doubled in one month

Global shipping prices are continuing to rise as Houthi rebels keep up attacks on cargo vessels in and around the Red Sea.

The disruptions are at a key point for ships passing through the Suez Canal and are creating ripples across supply chains in Europe and the U.S., delaying shipments and raising transportation costs.

Average worldwide costs of shipping a 40-foot container rose 23% in the week through Jan. 18 to $3,777, according to London-based Drewry Shipping Consultants, more than doubling in the past month.

The increases are being felt far beyond the disrupted trade routes that link China with Europe and the U.S. East Coast. Spot-market rates to ship a container from China to Los Angeles rose 38% in the week through Jan. 18 to $3,860.

“Volatility is back, big time in international container shipping,” said Philip Damas, managing director of the Drewry Shipping Consultants group.

Big companies that have longer-term contracts with ocean carriers are largely immune to spot-market swings. But Damas said many such companies are paying surcharges of 20% or more on top of contract rates to compensate for higher shipping costs such as fuel and insurance.

Houthi rebels in Yemen are attacking commercial vessels in response to Israel’s war with Hamas militants in Gaza. The rebels say they are targeting ships with links to Israel, but many vessels that have been hit have no apparent connection to Israel or its allies.

A U.S.-led coalition has positioned warships in the region to protect commercial vessels and has launched airstrikes on Houthi targets in Yemen, but that hasn’t put a stop to Houthi attacks on vessels. Several cargo vessels were struck by missiles or drones during the past week.

The International Monetary Fund says maritime traffic through the Suez Canal is down 37% so far in 2024 from a year ago. Major ocean carriers such as Denmark-based A.P. Moller-Maersk and Germany’s Hapag-Lloyd have diverted containerships around the tip of Africa, adding more than a week to transit times.

The delays are already affecting some manufacturers in Europe. Tesla and Volvo both suspended production of vehicles at plants in Germany and Belgium for a short time because of parts shortages. European retailers such as IKEA say they have enough inventory to manage the delays.

Some apparel companies bringing in spring fashion don’t have the luxury of waiting for their goods, said Brian Bourke, global chief commercial officer at SEKO Logistics, a Schaumburg, Ill.-based freight forwarder. Bourke said some European apparel customers are diverting goods to airfreight to ensure they arrive on time.

The disruptions at the Suez Canal are complicating freight flows at the same time as authorities are restricting the number of vessels that can transit the Panama Canal because of a drought.

Bruce Dzinski, director of international transportation at Woodcliff Lake, N.J.-based Party City, said his company is seeing delays of up to a week and extra charges of $300 to $500 per container on routes from Asia to U.S. ports.

“It’s causing some delays,” Dzinski said. “But we’re still getting it in time to get to the stores on time.”

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