World’s shipping costs skyrocketing because of Red Sea woes

Attacks in the Red Sea are starting to have a massive impact on global shipping costs, with many carriers being forced to reroute around the Cape of Good Hope.

In recent months, Yemen’s Houthi rebels have been targetting the Red Sea waterways and the situation, thus far, has only been escalating. On Thursday, the US and Britain carried out targeted attacks against the rebels in a bid to halt the Houthi’s activities.

It’s unclear, at this stage, if this will have the desired effect. In the meantime, shipping costs are skyrocketing.

READ MORE: Oil prices rise after US, Britain strike Houthi targets

For ships to travel from Shanghai to Rotterdam via the Red Sea, this journey amounts to approximately 12,000 nautical miles. But for a ship to traverse from Shanghai to Rotterdam via the Cape of Good Hope, this journey amounts to 16,574 nautical miles. This means that for a ship travelling at an average speed of 10 knots, it will take it around 70 days to complete its journey via Cape Town, versus the 50 days it would take via the Red Sea and Suez Canal.

As a result, the Drewry World Container Index illustrates how the pricing for a 40ft container has surged from $1,382 on 30 November, 2023 to $3,072 as of 11 January, 2024.

“The composite index increased by 15 per cent to $3,072 per 40ft container this week and has increased by 44 per cent when compared with the same week last year. The latest Drewry WCI composite index of $3,072 per 40ft container is the highest since October 2022 and is 116 per cent more than average 2019 (pre-pandemic) rates of $1,420,” say the authors of the Drewry Index.

However, it’s not just container costs that are soaring. Drewry in their latest report indicate that:

• Freight rates on Shanghai to Rotterdam have also risen by 23 per cent to $4,406 per 40ft box.
• Freight rates on Shanghai to Genoa increased by 25 per cent to $5,213 per feu.
• Rates on Shanghai to Rotterdam rose by 23 per cent to $4,406 per 40ft box.
• Likewise, rates on Rotterdam to Shanghai elevated by 19 per cent to $652 per 40ft container.
• Rates on Shanghai to New York increased by 8 per cent to $4,170 per feu.
• Also, rates on Shanghai to Los Angeles increased by 2 per cent to $2,790 per 40ft box.
• Rates on New York to Rotterdam and Rotterdam to New York surged by 1 per cent to $599 and $1,513 per 40ft box respectively. Conversely rates on Los Angeles to Shanghai dropped by 1 per cent to $766 per 40ft box.

“Drewry anticipates East-West spot rates to increase in the coming weeks, due to the Red Sea/Suez situation,” the authors said in their latest update.

Since October, Yemen’s Houthis have attacked commercial vessels in the Red Sea.

The Red Sea is a key route between Europe and Asia, which accounts for about 15 per cent of the world’s shipping traffic.