As the Red Sea crisis continues to disrupt shipping, global shipping prices continue to rise, having fully doubled in the past month. In addition, the Red Sea crisis has indirectly impacted the supply chains in Europe and the United States, causing delays in product shipments and even forcing some factories to shut down.
Global shipping prices double in one month
The average global shipping cost for a 40-foot container rose 23% to $3,777 in the week to January 18, according to London-based Drewry Shipping Consultants. The price has more than doubled from a month ago.
In the week ending January 18, container spot market freight rates from China to Los Angeles in the United States rose 38% to $3,860.
Philip Damas, managing director of Drewry Shipping Consultants, said:
"Volatility is back and this is a big moment for international container shipping."
While large companies with long-term contracts with ocean carriers are largely insulated from spot market fluctuations, Damas said many such companies are currently required to pay surcharges of 20% or more on top of contract rates to compensate for rising shipping costs such as fuel and insurance.
Bruce Dzinski, director of another international logistics company in New Jersey, said his company's route from Asia to U.S. ports is currently delayed by up to a week, with additional charges of $300 to $500 per container.
European manufacturing supply chains have been affected
The crisis in the Red Sea has further escalated since the US-led coalition launched air strikes against the Houthi rebels in Yemen.
The International Monetary Fund said maritime traffic through the Suez Canal has so far fallen by 37% compared with a year ago. Shipping giants Maersk and Hapag-Lloyd have changed the shipping route of container ships to bypass the Cape of Good Hope at the southern tip of Africa, which means that shipping time will be extended by more than a week.
Brian Bourke, global chief commercial officer of SEKO Logistics, an international logistics service provider in Illinois, said that as some European clothing companies are eager to put spring clothes on the shelves on time, they have been forced to change logistics orders from sea freight to air freight to ensure that the goods arrive on time.
Several more cargo ships have been attacked by missiles or drones in the region over the past week. Maersk CEO Vincent Clerc said last week that global shipping disruptions caused by attacks on ships in the Red Sea are likely to last at least several months.
These delays have affected Europe's manufacturing supply chains. Tesla and Volvo have suspended vehicle production at their factories in Germany and Belgium due to parts shortages. European retailers such as IKEA said they still have enough inventory to deal with the risk of delays.