News / Shippers must pay a heavy price for capacity, as 'ships are filling up'

Photo: © Prasit Rodphan | Dreamstime.com

The capacity crunch following carrier decisions to veto Red Sea routes will leave shippers with little choice but to pay premium rates, despite having long-term contracts.  

Crowd-sourced freight rates platform Xeneta said the Red Sea shipping crisis would get worse before it got better, and shippers needed to “get their act together quickly” to secure capacity in the run-up to Chinese New Year next month.  

In its latest analysis, Sea-Intelligence also warned that shippers exporting from Asia would have limited access to capacity in the coming weeks. 

“On Asia-North Europe, due to a combination of some services being held back in departure from Asia awaiting re-routing, and some services clearly arriving late into Asia, there is a rapid shortfall in the middle weeks of January, with a steep capacity drop expected for the week of 22 January,” explained Alan Murphy, Sea-Intelligence CEO. 

And freight forwarder Flexport urged: “Market demand is increasing in January, and all ships are filling up.” 

“If there is no room on the ship, your goods won’t be moved. It’s a serious risk to supply chains,” added Xeneta chief analyst Peter Sand. 

He said the high demand for capacity meant shippers on long-term rate contracts were being forced onto the spot market by carriers pushing for higher rates. 

“At times like this, shippers should not want to be paying the lowest price, because ocean freight carriers will look at those contracts and deem them to be lower priority than those agreed on the spot market at higher rates,” he said. 

The latest data from Xeneta shows ocean freight rates between the Far East and North Europe have increased 124% since mid-December, while rates into the Mediterranean are up 118%. Rates between the Far East and the US east coast increased by 45%. 

FreightRight CEO Robert Khachatryan told The Loadstar: “The high rates will likely hold – good news for carriers and forwarders, as the higher revenues often translate into higher margins. It is, of course, a big challenge for shippers who will have a hard time passing on the increase to consumers.” 

However, Mr Sand also warned shippers to be wary of “opportunistic behaviour” on the part of freight service providers. 

“A freight forwarder could throw out ridiculous prices, and a shipper desperate to protect supply chains may decide to accept it, if they have no understanding of the market,” he said. 

Meanwhile, the United Nations Security Council yesterday adopted a resolution demanding the Houthis immediately cease all attacks on merchant and commercial vessels.