Red Sea Security Concerns Force Increases in Shipping Rates

2024-01-10T16:55:19-05:00January 10th, 2024|

This is a follow-up on our initial newsletter sent last month. Please click here for the original post.

Due to security concerns along the Red Sea, many ocean carriers have taken  measures to protect their seafarers and vessels. As a result of these diversions, transit times have increased for voyages from Asia to Europe and the U.S.

There have been more than a dozen incidents since October, with the number  rising in the past few weeks. This has caused turmoil in the global logistics sector, with major route changes by ocean carriers impacting shippers.

Ships being diverted around the Cape of Good Hope, to mitigate the ongoing  risks, are experiencing trant times of 15-20+ days – with 3,000 more nautical  miles from Asia versus going through the Red Sea to the Suez Canal.

As a direct result of these reactive measures, ocean shipping rates are rapidly  rising with the potential of additional increases being implemented by carriers.  The possibility exists for January GRI’s and PSS’ averaging around $1,500. As vessel capacity continues to tighten, there continues to be a likelihood of  additional increases and higher spot rates.

Rates are also rising due to major insurance providers expanding the areas they consider “high risk.”

The American Journal of Transportation estimates operating costs for carriers are expected to rise 15 to 20% due to the diversions.

John S. Connor will continue to monitor this situation for our customers. Please contact us if you have questions about a particular shipment you feel may be affected.

 

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