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Exporters hit hard as Red Sea crisis drives China-US container leasing rates to unprecedented highs
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Shardul Nautiyal, Mumbai
February 17 , 2024
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Analysts have observed a notable surge in China-US container leasing rates due to the ongoing Red Sea crisis impacting pharma exports. A fresh analysis has revealed a threefold surge in rates signaling shift in supply-demand dynamics.
A comparative study comparing rates between November 2023 and February 2024 has revealed a profound impact of these factors on the global maritime trade landscape. The findings reveal a staggering threefold increase in average container leasing rates along specific segments of the China-US route, marking a significant departure from pre-incident levels observed in November 2023. This surge underscores the intricate interplay between geopolitical disruptions and seasonal festivities, reshaping supply-demand dynamics within the maritime industry.
Against the backdrop of the Red Sea crisis, transit times via the Cape of Good Hope have extended by 2 – 3 weeks, leading to heightened demand and capacity constraints in the China-US trade lane.
According to a freight forwarder speaking on the Air Cargo India Event in Mumbai, the additional surcharges per container has skyrocketed to USD 12,000 from the earlier USD 450 leading to a drastic increase in expenses.
A substantial disparity in leasing rates between February 2023 and February 2024, with this year's rates surpassing those of the previous year by a remarkable 300%. Such a disparity underscores the magnitude of the current market shift and underscores the resilience of maritime trade amidst global disruptions.
The gains in consumer spending and retail sales figures suggest that industry can expect decent demand recovery for goods, which translates into relatively higher container demand on the cards as retailers restock inventory and fulfill consumer orders.
It has been learnt that anticipated cooling off of rates post-Chinese New Year is contingent upon post-holiday demand dynamics. Early indicators, including gains in consumer spending in the US, December’s personal income and spending reports, and solid household spending, provide encouraging signals for the industry's resilience in the face of evolving challenges.
The convergence of the Red Sea crisis and the Chinese New Year festivities has catalyzed a seismic shift in China-US container leasing rates, underscoring the resilience and adaptability of maritime trade amidst geopolitical uncertainties.
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