When the shipping companies began to reroute in number round the Cape of Good Hope to avoid coming under attack in the Red Sea, no one imagined that this would become a long-term solution. It is clear, however, that this solution has been the rule on Asia-Europe routes for most of the current financial year and that this has had an impact on the profitability of the shipping companies.
Certainly, unit revenues per container are generally showing a profit, which was not the case in the second half of 2023. However the shipping companies are having to take into account a big increase in operating costs. A year ago, we estimated that the average break-even rate for shipping companies operating directly from port to port via the Suez Canal between Asia and Europe was USD1,800 per 40' container. According to our latest estimates, this rate has risen to USD3,400/40'.
As the new tendering season gets under way, with a first round which is bound to set rates above shipping companies' current break-even levels, we are naturally seeing a closing of the gap between the spot and contract market rates.
On an annual basis, supposing that the Cape of Good Hope route stays in general use, shippers need to prepare for a strong increase in their transport budgets, which will at least (...)