BAROMETER. Freight rates remained critical for the shipping companies in November, while geopolitical tensions complicated their operations.
Despite the reserves built up during the post-Covid years, the shipping companies and leading forwarders are having to restructure. When it published its financial results in early November, Maersk announced that it planned to eliminate another 3,500 jobs, taking its job cut total in 2023 to 10,000.
The state of the container shipping industry reflects the moroseness of the economy generally, generating fears of a significant increase in unemployment. It is as if the shock wave created by the pandemic was being felt now, after the withdrawal of government economic aid packages and the restoration of the profit margins of the big business groups.
Freight rates at preoccupying levels
The freight rate market is causing concern, particularly the Asia to Europe segment. The market is over-reacting to a fall in cargo volumes, which, ultimately, is relatively limited in scope. This is why the shipping companies reduced capacity to an extreme degree in November, increasing the number of blank sailings in an attempt to stop the terrible downward rate spiral.
Even MSC, which has gained most market share in 2023, seems to have called off its rate offensive, setting its official December FAK rates for port-to-port services from Asia to Europe at around the psychologically important USD2,000/40' mark. CMA CGM followed suit, with a fairly similar announcement of comparable rates.
We should be wary, however, about these announcements. The December market is already 95% covered by the established operators on terms identical or close to those which applied in November. Restoring freight rates as 2024 approaches will not be easy but the need for all operators to do so has become obvious.
Suez Canal access under greater threat
On 19 November, the ro-ro vessel, Galaxy Leader, was captured in the Red Sea by Houthi rebels from Yemen. The attack, which was carried out by helicopter, was violent. Its authors published a shocking video of the event, which was choreographed like a video game. This show of force was worrying because it showed that there are organised militias, which are clearly well trained and have at their disposal substantial airborne resources. There were other attacks in the Red Sea on 3 December. The American army said that it had good reason to believe that these attacks had been made possible with Iranian support. A CMA CGM vessel, with financial links to Israel, was also targeted in the Indian Ocean.
The deteriorating security situation in the area is causing a threat to access to the Suez Canal. Foreign navies have positioned a number of ships to counter possible attacks. The geopolitical situation is nevertheless causing concern among insurers and shipping company managers. Zim, which is particularly under threat, has decided to cease transiting via the canal in favour of the Cape of Good Hope route.
Panama Canal transit conditions deteriorate
The Panama Canal, which is another important point of passage for world trade, is also under threat. The drought conditions, which have obliged the authorities to limit traffic through the canal, have become a long-term phenomenon. Operating conditions have seriously deteriorated, and the shipping companies are faced with additional costs, long waiting times and passage programming problems. As a result, some ships are starting to take the long route round Cape Horn (...)
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