News / Evergreen clients signing transpac contracts as Red Sea crisis props up rates

Taiwan carrier Evergreen said yesterday it believed the escalation of Israel-Iran tensions means the Red Sea crisis would continue well into Q2 and, as this is keeping freight rates up, customers had been quick to sign long-term transpacific shipping contracts.

GM Wu Kuang Hui said: “Contract negotiations are in full swing and we’re quite optimistic, as customers are eager for discussions, regardless of freight rate levels.

“At the start of the year, customers were taking their time to decide on signing contracts, because rates were much higher than a year ago. Customers know now that if they don’t sign a contract now, they must pay the spot rates.”

Speaking prior to this morning’s news of an Israeli strike on Iran, Mr Wu added that liner operators were expected to continue detouring their vessels round the Cape of Good Hope.

He explained: “The detours mean operators have to add one or two more ships to maintain weekly services to customers. Even if they maintain weekly operations, it is inevitable that the slot supply will be limited, due to the different sizes of ships invested. Current freight rates show that the gap between supply and demand in the market is still there.”

And, while the Panama Canal Authority has been gradually increasing transit numbers, as the rainy season approaches, Mr Wu said they remained below pre-restriction levels.

Meanwhile, Mr Wu said, Evergreen’s performance for Q1 24 was expected to beat forecasts, as the Red Sea crisis had absorbed 5% of the estimated tonnage glut. Data submitted to the Taiwan Stock Exchange shows Q1 revenue at TW$88.63bn ($2.77bn), up 33% year on year.