Ship diversions from the Red Sea due to attacks by Iran-backed Houthi rebels have caused container freight rates to increase by about 30% in recent weeks. This rise is expected to continue as importers boost their volumes for the busy summer season, the Wall Street Journal reports. Nine out of 10 large container ships are avoiding the Red Sea and the Suez Canal, opting for a longer route around the Cape of Good Hope, which adds up to two and a half weeks to travel time.
This has led to a spike in shipping rates and delays. The article cites Dennis Tsakiris, who imports goods for his restaurants, reporting that shipping times have doubled and costs have increased by 30%. During the pandemic, shipping costs from China to California peaked at $20,000 per container but have now stabilized at $4,500, up from $3,100 in April. Rates from China to Europe have also risen.
Smaller customers are particularly affected by these changes, while larger importers like Amazon and Walmart, with long-term contracts, can better absorb the impact. The National Retail Federation indicates strong import trends, with ports handling increasing volumes of containers, suggesting robust consumer demand.
Shipping companies have adjusted their networks to account for the longer routes. Maersk, for example, has increased its container capacity by over 10% and expects higher earnings for the year. The diversions are seen as beneficial for shipping lines, which have raised their yearly outlooks. However, it remains uncertain whether the recent rate increases are a short-term spike or indicative of long-term trends.
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