Security concerns faced by global shipping companies in the Red Sea have imposed a financial burden on Chinese manufacturers and resulted in a shortage of available shipping containers in certain domestic ports, analysts said. To prevent risks and protect their interests, several international shipping companies have announced the suspension of Red Sea routes. The costs of rerouting vessels have led to an increase in expenses, leading to adjustments to their freight rates. For example, French shipping company CMA CGM increased the service rate for forty-foot equivalent units for all types of cargo shipments from Asia to the Mediterranean, raising it from USD3,000 to USD6,000, starting on January 15. Prior to this, several shipping companies, including Denmark’s Maersk Line, Germany’s Hapag-Lloyd and Geneva-based Mediterranean Shipping, also announced that they imposed additional charges on this heavily affected route starting from January 1.
Wang Lan, Manager at the Shanghai Shipping Exchange, said as many container vessels are opting for the longer route around the Cape of Good Hope in South Africa, this has led to a decrease in both vessel and shipping container turnover, resulting in a short-term shortage of shipping capacity. Freight rates on routes from China to Europe, therefore, have increased. Foreign trade companies are highly sensitive to changes in freight rates. With varying degrees of price increases on the Red Sea route, Chinese exporters must spend more on shipping fees, said Xu Kai, Chief Information Officer at Shanghai International Shipping Institute. Going around the Cape of Good Hope, distances increase by thousands of kilometers and rates increase substantially. Exporters will adjust their products' selling prices to absorb the additional expenses, ultimately to be borne by the buyers.
Many exporters seem to believe the increase in ocean freight costs can still be endured, but the lack of available slots is a problem as it means that a fully loaded container cannot be shipped out from the port, resulting in even greater losses, said Chen Hengde, President of Zhejiang Botai International Freight Forwarding, a Yiwu, Zhejiang-based freight forwarder. He said some foreign trade companies have opted to “bypass” the Suez Canal and instead utilize land transportation in Dubai in the United Arab Emirates and Dammam in Saudi Arabia for delivering goods in the Middle East, the China Daily reports.
