Summary:
In December 2023, tensions in the Red Sea region were renewed due to Houthi attacks on merchant ships arriving and falling in Yemen, affecting the navigation of the Suez Canal. This has had a huge impact on container shipping around the world, especially in the European market. According to the latest data, container freight rates in Europe have reached a record high of $1,200.
Background
The Red Sea is an important body of water connecting Asia and Africa and is one of the busiest shipping lanes in the world. The Suez Canal is an artificial waterway between the Red Sea and the Mediterranean Sea and is the shortest shipping route connecting Europe and Asia, with more than 180,000 ships pass through, accounting for about 10% of global container traffic.
In early December 2023, the Houthi declared war on Israel, which led to a sudden deterioration of the situation in the Red Sea region, threatening the safety of ships traveling to and from navigation. According to reports, Yemeni Houthi militants have carried out a number of attacks on the Red Sea region, destroying shipping facilities and ships. Although the United States hopes to fight the Houthis by uniting multinational peacekeeping forces, the Houthis are flexible and mobile and often use drone attacks, which greatly reduces their ability to maintain support. As of now, the international community has not been able to fully restore the normal operation of the canal, and navigation in the Red Sea remains restricted.
Impact
The Red Sea crisis has had a huge impact on container shipping around the world, especially in the European market. Due to the blockage of navigation in the Red Sea, many ships have had to make detours or change routes to the Cape of Good Hope in Africa, resulting in a significant increase in transportation time and costs. At the same time, the imbalance between supply and demand of containers has been further exacerbated due to the tight capacity, resulting in a surge in freight rates.
According to the latest data, container freight rates in Europe have reached a record high of $1,200. For example, freight rates on the China-Europe route have reached $8,000 per TEU, which is 18% higher than the average for November 2023 and 300% higher than the same period in 2022. This has adversely affected Europe's imports, exports** and economic recovery, as well as higher price pressures for consumers.
Europe is China's largest partner and an important export market for China. In the first 11 months of 2023, China's exports to the EU reached 42 trillion yuan, an increase of 15 percent year-on-year6%。However, due to the crisis of the Suez Canal, China's export goods are facing the risk of delay, detention and loss, which has also affected China's export earnings and foreign exchange reserves.
Outlook
At present, the Red Sea crisis has not been effectively resolved, and most ships detour through the Cape of Good Hope in Africa, and it is expected that the difficulties and high freight rates of container transportation will continue for some time to come. This is a huge test for both the global world and the economy.
Yemen's Houthi attacks pass through Red Sea vessels