Impact of Red Sea Attacks on International Freight Rates

Jan 03,2024
Industry News
In response to the recent attacks on merchant ships in the Red Sea, in order to be on the safe side and save freight as much as possible, how should we control and save freight

The Suez Canal is an important waterway connecting the Mediterranean and the Red Sea. About 12% of global trade passes through it every year. With the continuous development of global trade and the increasing demand for goods flow, shipping, as one of the important modes of transportation for cross-border foreign trade, has been facing many challenges. As Yemen's Houthi armed forces have recently launched multiple attacks on merchant ships in the Red Sea waters, some shipping companies have chosen to bypass the Cape of Good Hope in South Africa, another sea route from Europe to Asia, for safety reasons.

The route around the Cape of Good Hope is much longer than the route through the Suez Canal, approximately 11,000 kilometers longer. This means that ships require more time, fuel and manpower to complete transportation tasks, thereby increasing operating costs and risks. It is estimated that the route around the Cape of Good Hope costs US$30,000 more in fuel per day than the route through the Suez Canal, and it also faces threats such as pirates, storms and poor sea conditions.

Therefore, the route around the Cape of Good Hope is a loss for shipping companies and customers. It will not only lead to increased freight and surcharges, but also affect the timely delivery of goods and the balance of supply and demand in the market. This will have an adverse impact on global trade and the economy, especially in the context of the COVID-19 epidemic, where the stability and efficiency of the supply chain are even more important.

red sea attack

This situation has had a significant impact on the global shipping industry, mainly reflected in the following aspects:

First, the most direct impact is the increase in transportation costs. Longer range means more fuel consumption, which will undoubtedly increase operating costs. At the same time, the additional sailing days will also lead to reduced efficiency of use of ships and crews, further driving up costs.

Second, for industries that rely on ocean freight, extended transit times can lead to supply chain disruptions and delays. This could have knock-on effects on global trade and commodity markets, especially for those goods and industries that are time-sensitive.

Furthermore, the increase in freight costs and surcharges will eventually be passed on to consumers. That means prices for everything from daily necessities to industrial raw materials could rise as a result.

In addition, this situation may also have a certain impact on the global political and economic landscape. As an important waterway connecting the three continents of Europe, Asia and Africa, the safety and stability of the Suez Canal is of great significance to global trade and geopolitics. This diversion may cause countries to pay further attention to the safety of sea lanes.

This incident not only affected the global shipping industry, but may also have a profound impact on the global economy and politics. This once again reminds us that the importance of the security and stability of sea lanes to the global economy and trade cannot be ignored.

So how to control and save freight?

In view of the current phenomenon of more than 100 container ships being diverted away from the Suez Canal, freight control and savings have become particularly important. Here are some suggestions:

Optimize transportation routes

For ships sailing around the Cape of Good Hope, choosing a more economical and efficient route is key. Utilize advanced ship navigation systems and logistics information platforms to monitor and adjust navigation routes in real time to reduce unnecessary voyages and time.

Improve loading and unloading efficiency

In port operations, the loading rate and unloading speed of ships can be improved by optimizing the loading and unloading process. This reduces port dwell times and waiting times, thereby lowering port charges.

Reasonably arrange shipping schedules

According to the characteristics of the cargo and market demand, the shipping schedule is reasonably arranged to ensure that the ship arrives and leaves the port at the best time. This avoids unnecessary delays and waiting and reduces shipping costs.

Strengthen supply chain management

Optimize supply chain management to ensure the continuous flow of goods during transportation. By establishing close cooperative relationships with suppliers, manufacturers and distributors, we can reduce intermediate links and unnecessary transshipments and reduce transportation costs.

Adopt advanced cargo tracking system

Use advanced cargo tracking systems to monitor the location and transportation status of cargo in real time. This helps to promptly detect and solve problems during transportation and reduce additional costs caused by delays and lost goods.

Make rational use of various modes of transportation

According to the characteristics of the goods and transportation needs, sea transportation, air transportation, land transportation and other transportation methods are reasonably selected. Through reasonable combination, the transportation cost can be optimized.

Build a stable partnership

Establish stable cooperative relationships with reliable shipping lines, port operators and logistics service providers. This ensures reliability and stability during transportation and reduces additional costs due to emergencies.

Strengthen market analysis and forecasting

Understand market dynamics and trends through in-depth analysis and forecasting of the international shipping market. Adjust transportation strategies in a timely manner according to market changes to reduce transportation costs.

Through the implementation of the above measures, freight can be effectively controlled and saved, and costs during transportation can be reduced. However, in actual operation, all stakeholders need to work closely together and work together to ensure the smooth progress of the entire transportation process. If you want to know more about how to save shipping costs, you can contact chinadivision. We have a corresponding solution for this incident.