Shipping rates rise as companies expect more attacks in the Red Sea

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The cost of international shipping has soared as companies prepare to ship goods for the holiday season much earlier than usual, in a sign of the far-reaching effects of the disruption caused by the attacks at Sea. Red.

The average cost of shipping a 40-foot container between the Far East and Northern Europe at short notice, the most sensitive figure to market prices, reached $4,343 last week, about three times more than in the same period last year, according to the transportation market tracker. Xeneta.

Prices have yet to surpass the peak seen immediately after Yemen’s Houthi militant group began attacking ships in November. But they are recovering during a generally quiet period for shipping in the spring months.

Typically, the peak period occurs between late summer and fall, when retailers begin importing products for November’s Black Friday sales and the holiday shopping season.

“The peak season has come early,” said Michael Aldwell, head of marine logistics at Kuehne + Nagel, one of the big shippers that handles freight and sets shipping pricing for retailers.

Industry figures said the resurgence in shipping costs had multiple causes. But these were largely related to the attacks in the Red Sea, which the Houthis have said are in support of Gaza’s Palestinians during Israel’s war against Hamas, they said.

This has limited the global supply of shipping and container space, as shipowners traveling between Asia and Europe are forced to take a longer route around Africa.

Because of the war in Gaza, shippers are preparing for attacks to disrupt global supply chains during the fall months, when retailers typically import Christmas goods.

Aldwell said some Kuehne + Nagel customers had booked shipments for the holiday shopping period as early as April, while others were stocking up on summer products such as outdoor furniture and barbecues.

He added that demand had also been boosted by customers who previously reduced their inventories in anticipation of weak consumer demand this year. With consumer demand no longer as depressed as some companies had hoped, “they are very quickly paying higher prices to access (limited shipping) capacity.”

Peter Sand, chief analyst at Xeneta, which provides data to traders, said importers had learned the hard way during the pandemic that the best way to build resilience into their supply chains was to “stock up as quickly as possible”.

He said companies had told Xeneta that some decided to “bring in Christmas products if they can now because they may lack capacity in the traditional peak season.”

“This is a direct response to the disruption that occurred with the Houthi attacks,” he added. “No one is really sure when it will go away.”

Faced with a weak global economy and an oversupply of ships last year, “all the major shipping lines were suggesting (that their financial prospects) were going to be quite weak” before the attacks in the Red Sea began, said Marco Forgione, CEO of the International Trade and Export Institute, which represents UK traders.

Now, the disruption is expected to continue later this year, he said.

Even after the Red Sea disruption is resolved, “supply chains will be different in the future” as globalization is threatened by repeated geopolitical instability, Forgione added. “We’re going to see inventory management much more at the forefront,” she said.

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