The Zhitong Finance App learned that the economic impact of the Houthis attack on merchant ships in the Red Sea is expanding.

As ships bypass the Cape of Good Hope in Africa, ships with unpredictable sailing schedules blocked major Asian ports, causing a shortage of empty containers in some places and piles of containers in other places. Shipments to the US and Europe take longer and freight rates continue to rise.

There are a number of reasons for this phenomenon — including strong demand for goods in the US. But the latest round of trade turmoil is largely due to the diversion of the Red Sea. Copenhagen-based maritime data and consulting firm Sea-Intelligence recently calculated that the diversion increased the average shortest transit time from Asia to the Mediterranean by nearly 40% and the average shortest transit time to Northern Europe by 15%.

Boat detours are increasing congestion in ports such as Singapore. The UAE's Jebel Ali Port is also facing congestion problems because of its proximity to the Red Sea and it is a major transit center for sea and air cargo through Dubai.

Major global ports are facing congestion problems

As home to the world's second-largest container port, Singapore issued a statement last week saying that since the beginning of 2024, the number of inbound containers in Singapore has increased dramatically, leading to an 8.8% year-on-year increase in the number of containers from January to April this year. The Singapore Port Authority said that some ships had a waiting time of two to three days.

Tan Hua Joo, container market analyst at Linerlytica, said, “The situation is expected to worsen due to the increase in the number of unscheduled ship arrivals and excessive terminal utilization.”

Supply chain managers who pay for these services have had to place orders ahead of time as the ship's berthing time increased and the range extended. According to Sea-Intelligence data, the punctuality rate of container ships has dropped to around 52%. Compared with the low of about 30% during the epidemic in early 2022, the improvement has narrowed drastically last year.

The punctuality rate of container ships is declining

Transportation of goods from China to Europe and the east coast of the United States takes a particularly long time because most ships on these routes avoid the Suez Canal shortcut.

The number of transit days is still increasing

On the demand side, strong demand from the US is increasing capacity constraints. The import volume at the Port of Los Angeles in the first four months of this year shows this. Preliminary data for May from America's busiest port shows that this trend continues — throughput for three of the past four weeks was higher than the same period last year.

Strong imports through the Port of Los Angeles

The imbalance between supply and demand occurred at least one month before the July-September shipping season. At that time, retailers will be stocking up for back-to-school sales and year-end holidays, and placing large orders with Asian suppliers. It has not yet reached the level of panic at the level of an epidemic, but some analysts say that with geopolitical risks and tariff threats so widespread, this situation may worsen on its own.

Container prices rise in the short term

Lars Jensen, founder of Vespucci Maritime and shipping analyst, said: “As more and more shipping companies enter the peak season early, capacity shortages and rising freight rates have caused other shipping companies to join in.” In the process, he said, they are “creating a crisis they hope to avoid.”

As a result, spot freight rates have risen sharply.

As demand increased, the more expensive mode of transport — air freight — also had an impact on specific routes. Trine Nielsen, senior director of logistics technology company Flexport Inc., and head of the EMEA shipping business, said this indicates that some shippers “expect the peak period to last longer.”

Rogier Blocq, director of product development at Amsterdam-based WorldACD, said air freight prices from the Persian Gulf and South Asia to Europe rose nearly 80% year over year in May. This was particularly evident when the global average price increased by around 3% during the same period.

Air cargo prices in the Persian Gulf and South Asia have risen sharply

Rolf Habben Jansen, CEO of Hapag-Lloyd, the world's fifth-largest container shipping company, said it is still unknown how long it will take for this interconnected system to return to balance.

“If the situation in the Red Sea does not improve, this situation will probably continue for a few more months,” he said.