Red Sea crises continues to disrupt sea trade with longer transit time, high costs

Authored by Sunil
Vaswani, Executive Director, Container Shipping Lines Association (CSLA)

There seems to be no end to the woes of the Shipping industry per se & the trade at large !!

The Red Sea crisis, which continues to prolong, has already created supply chain issues the world over. With ships getting diverted over the Cape of Good Hope, instead of sailing through the Suez Canal, the transit time has increased by 35 to 40 pct. For instance, a round trip between the West Coast of India & Europe, which earlier took 63 days with 9 ships for a weekly service, now takes 87 days with 12 vessels in deployment. This is just one service that we are talking about. With several services being impacted, there are massive capacities that the shipping lines have had to struggle to add to their existing fleet, thereby increasing their capital expenditure, charter hire, crew cost, fuel cost, insurance premium, etc. etc. Dependence on transshipment hubs too has increased to help handle erratic cargo flows & maintain schedule reliability, as far as possible. Be that as it may, the lines have done their best to stabilise the situation under the given circumstances although congestion at some of the ports is getting to be a matter of concern.

On the 14th of May 2024, the U.S. announced new increases in trade tariffs on USD 18 billion worth of Chinese imports, covering key strategic industries like electric vehicles, solar panels & semiconductors. The increased tariffs cover 14 different Chinese products & include hiking of import duties on imported Chinese electric vehicles from 25 to 100 percent in a matter of months. Other categories, such as, natural graphite, critical minerals and syringes & needles , which were previously not subject to tariffs, will soon be subject to import duties, ranging from 25 to 50 percent.

This has resulted in a scramble for space at Chinese ports for shipments to the U.S. Containers therefore tend to get rolled at load ports for a week or two. Pressure on Singapore, as a transshipment port, too, has increased & led to berthing delays of a week, as compared to hardly one or two days earlier. As far as Indian imports from China & the Far East are concerned, space is indeed an issue. Ships spending more time on longer transits & berthing delays are indeed a matter of concern as these constraints virtually suck out that much capacity from operation. The lines are however doing their best to accept bookings at origin, although roll overs of a week or two are quite possible. Some of the lines have also started skipping Singapore & transhipping containers at other hubs like P. Klang instead, while some have resorted to ad hoc vessel calls to increase the capacity and push out the containers. All these measures should hopefully help to an extent but shippers & consignees would do well to plan their shipments accordingly in view of the given circumstances.