The outlook, the short- and medium-term outlook remains highly dependent on the evolution of the geopolitical scenario. A de-escalation could result in a gradual normalisation of bunker costs and a return of freight rates to pre-crisis levels. 

The container sector is currently experiencing a highly complex period, with the Gulf crisis coinciding with a period of structural overcapacity and the carriers' failed attempt to resume the Suez Canal route. Some major industry analysts have drawn conclusions from recent developments, which seem to contradict the current market situation. 

Linerlytica is one of the sources that has made this claim. Despite the ongoing conflict, the company says that container freight rates are falling again because the capacity that was previously used in the Persian Gulf has now been moved to other routes. In other words, after an initial critical phase involving delays, blank sailings and congestion, the market is moving towards partial normalization.  According to analysts, overall cargo capacity utilisation on the main routes is well below the level required to sustain the announced increases. This has led carriers to 'take back' some of the surcharges introduced mid-month.

Spot freight rates on the Far East–Mediterranean route are recovering.

In this context Xeneta has observed a 29% recovery in spot freight rates on the Far East-Mediterranean route, following a decline in January due to the outbreak of hostilities in the Middle East in March. The company expects a period of stability for the first two weeks of April, followed by growth in average rates and, ultimately, substantial stability for the lowest rates.

Related : The Implications of a Global Increase in Oil Prices.-Report

Sharply rising rates

 Meanwhile, Drewry's snapshot of the current situation (or rather, the situation for the week ending today) reveals sharply rising rates, with an average increase of 5% for 40-foot container shipments to $2,279. There was a particularly sharp increase of 12% on the Shanghai–Genoa route, where costs rose to $3,474, while the Shanghai–Rotterdam route increased by a more modest 3% to $2,552. British analysts have noted the introduction of surcharges of around $3,500 per 40-foot box, as implemented by CMA CGM, and have reported only three blank sailings on this corridor for next week, indicating stable cargo availability. Overall, they expect freight rates to rise in the coming weeks.

The strategies adopted by shipping companies

Examining the strategies adopted by shipping companies to manage the crisis and the closure of the Strait of Hormuz, Linerlytica emphasises the re-establishment of intra-Gulf feeder services and 'opportunistic' connections between India, the United Arab Emirates, and Oman, which have helped to maintain trade in the region.

 The subject of route redesign,

In this regard, Maersk chairman Robert Maersk Uggla sounded the alarm yesterday during the group's annual results presentation. He spoke of the "pressing need" for food imports to the area, which "often use cold chain solutions, such as reefer containers". He added that, with the closure of the Strait of Hormuz, they were looking for other ways to bring 

Returning to the subject of route redesign, carriers are organising the transportation of goods from Red Sea ports, such as Jeddah and Yanbu, to the United Arab Emirates and inland destinations in Saudi Arabia. Meanwhile, ports in southern Turkey are becoming increasingly important for traffic bound for Iraq.

 The outlook, the short- and medium-term outlook remains highly 

Xeneta has highlighted that, given the growing complexities, indexed formulas are gaining ground on long-term contracts. This is replacing traditional long-term fixed-rate contracts as a hedge against volatility. Finally, in regard to the outlook, the short- and medium-term outlook remains highly dependent on the evolution of the geopolitical scenario. A de-escalation could result in a gradual normalisation of bunker costs and a return of freight rates to pre-crisis levels. However, it will take time to manage capacity reallocation. Conversely, further escalation could lead to new price increases, creating attractive opportunities for carriers in the context of excess capacity.

Related : The oil majors' production in the Middle East

Agencies 

#Xeneta # bunker costs # freight rates # CMA CGM #Robert Maersk Uggla #Maersk # Drewry #The container sector #Suez Canal #Linerlytica #Container freight market # Gulf crisis # underlying overcapacity #Jeddah