Maersk CEO: Red Sea-Driven Capacity Challenges Will Persist into Q3
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Expect the disruptions to container shipping in the Red Sea to linger into the third quarter, according to Maersk CEO Vincent Clerc.
The ocean freight giant is still diverting its container vessels away from the Red Sea and the neighboring Gulf of Aden, instead rerouting them around southern Africa’s Cape of Good Hope, to avoid the ongoing drone and missile attacks perpetrated by Houthi militants in Yemen.
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The onslaught on commercial shipping has persisted since November, forcing Maersk and chief competitors like Mediterranean Shipping Company (MSC), CMA CGM, Cosco Shipping and Hapag-Lloyd to do the same. The mass rerouting has lengthened transit times for goods from Asia to Europe, further causing capacity constraints out on the ocean and leading to congestion at the two largest ports in the world, Shanghai and Singapore.
“Today, all ships that can sail and all ships that were previously not well utilized in other parts of the world have been redeployed to try to plug holes,” Clerc said to customers during a recent online event. “It has alleviated part of the problem, but far from all the problem across the industry, including for Maersk. We are going to have in the coming month missing positions or ships that are sailing that are a significantly different size from what we normally would have on that string, which will also imply reduced ability for us to carry all the demand that there is.”
According to Clerc, the capacity constraints exist because it takes two to three ships to extend one voyage to travel the longer route around Africa, depending on the trade in question.
Clerc noted that the availability of additional capacity was already low to begin with, which has limited carriers’ ability to bring in extra tonnage.
Planning for demand peaks around Lunar New Year helped soften the impacts of the Red Sea situation in the first quarter, according to the CEO. But the challenges since April and May the challenges have intensified, he said.
Clerc also pointed to one of the more obvious impacts of the Red Sea crisis—the acceleration of ocean freight rates, which have continued their ascent since April after the post-Lunar New Year comedown.
Drewry’s World Container Index (WCI), which measures ocean spot freight rates across eight major trade lanes, increased 4 percent week over week to $5,318 per 40-foot container on Thursday. Since Nov. 30, these container prices have shot up nearly 285 percent. Some speculation from maritime trade advisory service Sea-Intelligence even indicated that freight rates can escalate to roughly $20,000 per container on Asia-to-Europe routes.