Global shipping rates have spiked due to recent attacks on vessels in the Red Sea. Freightos CEO Zvi Schreiber (CRGO) joins Yahoo Finance's Rachelle Akuffo to discuss why numerous shipping companies have rerouted to avoid the area, lengthening journeys.
Schreiber notes Red Sea routes saw costs jump from $1,200 in November to $4,800 currently - nearly a 4x increase since the assault threats emerged. Still, he says this pales in comparison to peak COVID-era pricing, which surpassed $15,000 per container. "Although we're seeing a big spike, it's still moderate," compared to the pandemic era, Schreiber says.
The China-to-Europe corridor is among the most impacted by rerouting, with ships circumventing Africa instead, explains Schreiber. This major detour dramatically escalates costs and shipping timelines to Mediterranean and regional ports. Meanwhile, droughts have also temporarily constrained transit through the Panama Canal to the US East Coast.
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Editor's note: This article was written by Angel Smith
Video Transcript
RACHELLE AKUFFO: While staying in the shipping lane, JP Morgan warning that consumer price inflation might grow, thanks to rising global shipping costs. This comes after several shipping companies are avoiding the Red Sea due to the threat of those Houthi attacks targeting cargo ships. Well, that's what's going to cost the companies, maybe us.
Freightos is a booking platform providing real-time global pricing, and they're seeing some big price spikes. Zvi Schreiber, Freightos' CEO is here to break this down for us. Thank you so much for joining me this morning. So given that we're seeing several companies continuing to pull back and diverting around the Red Sea, how is this starting to add up cost-wise for these companies?
ZVI SCHREIBER: We're seeing quite a big jump in costs so. The Freightos terminal has data which tracks the daily prices of shipping. And our FBX11 index specifically tracks the cost of shipping a 40 foot container through the Suez Canal from China to Europe, for example. And that has jumped from about $1,200 in November, before these attacks started, to about $4,800. So it's gone up 4X during these attacks. So that's a pretty big jump.
Having said that, to put it in context, during COVID, that same price reached $15,000. So although we're seeing a big spike, it's still moderate, compared to what we saw a couple of years ago during COVID.
RACHELLE AKUFFO: So Zvi, which trade routes are seeing the biggest jump in cost? Because we saw some tempering, I believe, to the US coming out of December, but a different situation from China to Europe.
ZVI SCHREIBER: So the route that's most obviously impacted is China to Europe, China to Asia to the Mediterranean because that's the Suez route. And as you said correctly in the introduction, many carriers are now avoiding that route and circumventing all of Africa, making that a much longer and more expensive route.
But one of the strange twists to this is that this is happening simultaneously with problems in the Panama Canal, which is suffering from drought. And the Panama Canal has less capacity than it usually does at the moment. And so actually, it's impacting America more than you would expect. Because if you want to get goods from Asia to the East Coast of America, your first choice is across the Pacific and through the Panama Canal.
When the Panama Canal is restricted due to a lack of water, some of that trade was getting rerouted to the Suez Canal, which is your second best route from China to the East Coast. And that diversion was happening just at a time when then the Suez Canal got into trouble. So the routes to the East Coast are impacted by the combination of problems in the Panama Canal and the Suez Canal.
RACHELLE AKUFFO: So this is really exacerbating then, existing problems that we were already seeing. So in terms of how you're currently tracking the prices, talk about the technology and the data points that you're using and really the inflows that you're seeing into whether people are deciding to still continue to ship given the cost versus using air freight.
ZVI SCHREIBER: So Freightos is a digital booking platform. We're finally bringing to this industry the digital choice that you've had as a passenger for many, many years. So in the same way that you may use a booking.com to choose a hotel or a flights, we're doing the same thing in freight, both ocean and air. And that becomes very important when there is disruption because then people have to switch quickly if freight is, for example, delayed on the ocean, maybe they need to send some goods by air.
So the ability that this industry is finally adopting to book things digitally in real time is very timely. It's bringing at least some of the agility that other industries have had for many years and the ability for our customers to adjust in real time when there are disruptions and delays.