The recent turmoil in the Red Sea region has led to significant disruptions in the global shipping industry, particularly impacting the Transpacific trade routes. This article explores the current trends, rate fluctuations, and space situations in the Transpacific market, helping shippers navigate these turbulent times due to the Red Sea Crisis.

Part I: Transpacific Rates Trend & Market Information

The Red Sea Crisis and Its Impact

The ongoing conflict near the Red Sea has resulted in attacks on commercial vessels, prompting carriers operating Asia-Transpacific lanes to divert their routes. This redirection has caused substantial delays, with vessels either joining long queues at the Panama Canal or opting for the longer journey around the Cape of Good Hope. The situation has led to an unexpected spike in freight rates, reminiscent of the highs experienced in early 2022.

Soaring Freight Rates

MSC, a leading carrier, announced a significant rate increase effective January 15, with rates reaching up to $7300 for different U.S. destinations. The U.S. Federal Maritime Commission (FMC) waived the 30-day notice requirement for such surcharges due to the Red Sea crisis, enabling carriers to implement rapid rate adjustments. While the increase for the U.S. East Coast (USEC) might be feasible, it’s anticipated that the West Coast (USWC) might not experience such drastic hikes due to demand dynamics.

Capacity Management and Blank Sailings

Carriers are strategically managing their capacity by increasing blank sailings in January and February. This approach, coupled with the shift of boxes destined for USEC/GULF through USWC hubs, could see a rise in demand at these ports. Consequently, additional Peak Season Surcharges (PSS) on top of General Rate Increases (GRI) are expected.

Expanding further, the decision to increase blank sailings, while disruptive, is a calculated move by carriers to maintain a balance between available capacity and demand. This is particularly important in light of the ongoing Red Sea situation, which has led to longer transit times and rerouted shipping paths. As a result, carriers are faced with the challenge of optimizing their schedules and fleet deployment to avoid operational inefficiencies and escalating costs. The anticipated spike in demand at USWC ports, driven by rerouted traffic, could exacerbate the already strained capacity. Shippers should be prepared for a more competitive environment when securing space on vessels, and possibly longer wait times. In such a scenario, the implementation of PSS and further GRIs seems almost inevitable as carriers look to offset the increased operational costs and manage the higher demand. Shippers navigating these routes will need to plan meticulously, factoring in these additional costs and potential delays in their logistics strategies.

Shipper-Owned Container (SOC) as an Alternative

With the shortage of empty containers due to the Red Sea situation, SOC emerges as a viable option. Maersk, for instance, offers competitive SOC rates with space and equipment guarantees, although without fixed loading dates. These rates are valid until January 31, 2024, with specific surcharges applied to GULF routes.

Part II: Transpacific Space Situation

Space Tightening in China and Southeast Asia

The Chinese New Year (CNY) peak season, coupled with increased blank sailings, is causing space to tighten in China. Carriers are controlling space allocations and pushing towards online spot or high-priced E-commerce products. Similarly, Southeast Asian countries like Vietnam and Malaysia are facing super tight space situations for USEC/RIPI and USWC routes, respectively. ZIM’s operation limitations in Malaysia further compound these challenges.

Recommendations for Shippers due to Red Sea Crisis

Given the current disruptions and tight space, shippers are advised to:

  • Arrange bookings at least 4 weeks prior to the Estimated Time of Departure (ETD).
  • Consider alternative options like SOC for guaranteed space.
  • Stay updated on carrier performance and rate changes.
  • Plan for potential delays due to the high volume of diverted shipments.

Final Thoughts

The shipping landscape, particularly in the Transpacific sector, is currently fraught with challenges. The Red Sea Crisis has catalyzed rate increases and capacity constraints, making it crucial for shippers to stay informed and adaptable. By understanding these market dynamics and exploring alternatives like SOC, businesses can better navigate these turbulent waters. ExFreight digital shipping solutions