HSBC Global Research has raised the alarm over the escalating crisis in the Red Sea, warning of potential port congestion and a subsequent surge in shipping rates. The crisis, marked by uncertain vessel schedules and equipment shortages resulting from the displacement of empty containers, is looming as a significant challenge for the maritime industry.
As the Red Sea situation continues to unfold, there are growing fears that the approaching Chinese/Lunar New Year could exacerbate the challenges, creating a perfect storm for the shipping sector. HSBC analysts express concerns that if the crisis remains unresolved in the coming weeks, spot rates could experience a further hike, consequently impacting contract rates as shipping liners engage in annual negotiations with retailers.
The Shanghai Containerized Freight rates (SCFI) have already witnessed a substantial 8% week-on-week surge, reaching its highest level since October 2022 and nearly doubling the rates observed at the end of November. Notably, both the SCFI and SCFI Shanghai-Europe rates are currently at their peak levels on record, excluding the COVID-19 period.
While the rally in rates is primarily attributed to the Asia-Europe routes, HSBC observes a broader impact, with spot rates on other routes, including the transpacific, also experiencing an upward trend in the aftermath of the Red Sea crisis.
The maritime disruptions come in the wake of approximately 25 attacks on merchant shipping by the Houthis since November, forcing container lines to reroute ships around the Cape of Good Hope. If the Red Sea situation persists, industry experts suggest that shippers may explore alternative options such as air freight or rail due to the extended voyages required via the Cape of Good Hope.
In a broader economic context, HSBC predicts a modest rebound in global trade for 2024, estimating world exports to grow by 1.8% in the same year and 3.4% in 2025. However, caution prevails as potential downside risks, including higher interest rates, uncertainty in Chinese demand, geopolitical conflicts, and trade uncertainties, could impact these projections.
Source: HSBC Global Research
