Middle East situation disrupts the container shipping market, with some shipping companies suspending Middle East routes and freight rates soaring to $6,000/FEU

Cailian Press, March 2nd (Reporter Hu Haoqiong) “Our Middle East routes have already suspended quoting, while European routes have slightly increased compared to a few days ago,” a shipping freight forwarder told Cailian Press.

Affected by the turmoil in the Middle East, the shipping market is “disrupted.” The Strait of Hormuz is “choked,” pushing up risk premiums in the oil shipping market; the container shipping market is also impacted, with some Middle East routes partially halted and some carriers raising freight rates; a freight forwarder said that freight rates for Europe and even Africa routes are expected to rise. Possibly due to this, as of today’s close, the European container futures (EC) hit the daily limit up.

“Geopolitical risk escalation has driven up Middle East route freight rates, and the shipping pace for subsequent shipments still needs to monitor the conflict’s development,” said Wu Jialu, Chief Analyst at CITIC Futures.

Digital international logistics service provider Yunqu Logistics Technology Group (referred to as “Yunqu”) told Cailian Press that most shipping companies on Middle East routes have chosen to suspend accepting cargo, although some continue to accept cargo, but have announced significant price increases or high surcharges, with freight rates soaring to around $6,000 per FEU. This will significantly increase logistics costs and cause shippers to adopt a wait-and-see attitude about shipments. Even if shipments are made, they will bear high risks. “Additionally, some shipping companies have not yet made statements and remain cautious. We still need to watch whether risks further escalate.”

Currently, major liner companies are taking measures regarding Middle East routes. MSC announced that it will suspend global cargo bookings to the Middle East until further notice. Hapag-Lloyd announced a suspension of transit through the Strait of Hormuz until further notice.

COSCO Shipping Holdings (601919.SH) subsidiary COSCO Shipping Container Lines issued a business notice stating that ships within the Persian Gulf, under safe conditions, will complete their scheduled port calls and operations, then stay at anchor or in safe waters; for ships heading toward the Persian Gulf, relevant vessels have been notified to pay attention to navigation safety, either slow down, head to safe waters, or designated shelter anchorages for further instructions.

CMA CGM announced that from March 2nd until further notice, an emergency conflict surcharge (ECS) will be levied, including a $3,000 fee per 40-foot dry container.

Regarding the short-term suspension of Middle East routes caused by the blockade of the Strait of Hormuz, Yunqu’s assessment is that currently Middle Eastern countries are in Ramadan, and after the fast-breaking in the second half of the month, a cargo replenishment peak is expected. The suspension of Middle East shipping may not last too long.

Cailian Press learned from DP World that Dubai Jebel Ali Port, which announced suspension of operations on March 1st due to the Middle East situation, has now resumed operations.

On European routes, Yunqu believes that the capacity was reduced during the Spring Festival market, leading to a short-term supply-demand imbalance. As the European routes’ capacity recovers in the second week of March, the market space supply for this route will tend to stabilize.

Wu Jialu believes that capacity on this route will gradually recover in March, and with MSC announcing that European route freight rates will reach $3,200 per FEU in the second half of March, the fulfillment rate may be higher than in the first half of the month. “If the market continues to be affected by ongoing Middle East tensions, the freight rate center for other routes will stop falling and rebound, with upward movements still needing to monitor the passage conditions of the Strait of Hormuz, port operations, and overall infrastructure performance. Overall, recent market volatility risks are relatively high.”

Regarding spot freight rates, according to Ji Yu Technology’s data, the lowest quote from Shanghai Port to Rotterdam today is $1,950 per FEU, up $20 from the lowest quote on February 27; the lowest quote from Shanghai Port to Antwerp Port has also increased by $20 per FEU.