Red Sea conflict sparks airfreight disruptions and container market volatility

MIDDLE EAST – Escalating tensions in the Red Sea have triggered disruptions in both airfreight and the container market, with ripple effects felt across the Middle East and West Asia.

The conflict in the Red Sea has prompted a modal shift in cargo movement, causing disruptions in airfreight services.

dnata, a UAE ground-handler in Dubai, and Bangkok Flight Services (BFS) temporarily suspended throughput due to a surge in airfreight volume relative to ocean freight that bypasses the Suez Canal.

While dnata’s operational stoppage was later clarified as “company-specific,” BFS faced processing challenges, citing a rapid increase in cargo volume.

Over weekends, consignee cargo idling at BFS facilities contributed to throughput capacity shortfalls, as up to 30% of cargo remained unprocessed. However, BFS has since reported a normalization of processes, allowing it to resume full operations.

Despite dnata avoiding speculation about the impact of Red Sea-related airfreight challenges, Etihad Cargo in Dubai acknowledged a significant uptick in volume.

Danish freight forwarder Scan Global Logistics (SCL) highlighted notable airfreight congestion leading up to the Chinese New Year, with hubs like Colombo, Singapore, Doha, Dubai, and Bangkok experiencing the highest levels of disruption. SCL reported a surge in airfreight rates of up to 30% between late January and early February.

Container market faces prolonged volatility amid Suez Canal crisis

The container market is grappling with continued rate fluctuations, a direct consequence of shipping lines diverting away from the Suez Canal due to persistent threats from Houthi rebels in Yemen.

Eleanor Hadland, a lead analyst at Drewry, emphasized the uncertainty surrounding the timeline for a return to normalcy amid the ongoing volatility.

The impact of the Red Sea situation is evident in a drastic decline in vessel calls at key ports, particularly in Saudi Arabia.

In the fourth quarter of 2023, container line calls at the Port of Jeddah plummeted by 48%, with a mere 22 vessels making port calls in January 2024, compared to the previous average of 43 calls per week.

The situation at the King Abdullah port was even more severe, witnessing a staggering 76% decrease in port calls during the same period.

Vessels rerouting via the Cape of Good Hope to avoid the Red Sea situation are encountering substantial delays.

Delays of around ten days for vessels traveling from Asia to Rotterdam and at least 15 days for those heading to Mediterranean ports are exacerbating the impact on the cost of container shipping. Approximately 30% of the global container vessel fleet, as measured by capacity, is affected.

Container shipping freight rates have surged, experiencing an increase of up to 200% for a forty-foot equivalent unit (FEU). Drewry analysts caution the industry to brace for additional rate increases, emphasizing the likelihood of capacity shortages and extended delays.

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