The global shipping industry is going through an Uber-style price surge, just as traffic costs soar when passengers outnumber vehicles during the busiest times of day.

The intelligence finance news app has learned that the Freightos shipping platform's index shows that after the Houthi armed forces launched missiles at ships heading towards the Suez Canal, shipping costs more than doubled, rising from approximately $1,200 per trip in 2023 to $3,400 in January. The index tracks the spot price of 40-foot containers on 12 major trade routes. Prices fell in March and April, but have rebounded to $4,500 since May, more than three times the pre-crisis level.

At first glance, the recent surge in shipping costs seems strange, as the traditional peak season for exporters to fulfill holiday orders is still far away in 2023 and, unlike the situation in 2021 when shipping costs soared to nearly $12,000 after the epidemic, there should be plenty of ships this time around. In fact, to counter disruptions during the epidemic, the industry has been working hard to absorb a record number of new ship orders. According to Jan Tiedemann, an analyst at AXSMarine, in 2023, newly delivered container ships will add a record 2 million 20-foot equivalent units (TEUs) of capacity. Another 3 million TEUs will be added this year, and another 2 million TEUs will be added in 2025.

However, a series of opposing forces are driving up freight rates. One is the cyclical rebound in the world economy. According to the S&P Global Purchasing Managers Index (PMI), global manufacturing output accelerated in May, growing at its fastest pace year-on-year in 22 months. In addition, Germany and France have suffered major port strikes, and the U.S. East Coast and Gulf of Mexico may also be affected, which could lead to upward pressure on interest rates even without the other two unusual factors.

One of the unconventional driving forces behind this may be that exporters have been working to speed up deliveries to avoid the growing concerns of trade protectionism policies. In May, U.S. President Biden announced a significant increase in tariffs on $18 billion worth of Chinese goods, including electric vehicles, batteries, semiconductors, steel, solar cells, and medical products.

According to CIB Research analysts under the China Industrial Bank, some of these tariffs are expected to take effect as early as August, a threat that has prompted all parties to scramble to load Chinese export products early and stock up on inventory for importers. Official data shows that the United States was the fastest-growing developed market for Chinese goods exports in May.

The trouble that exporting countries and importing countries face is that geopolitical tensions may escalate. EU and other U.S. allies have come under pressure to expand tariffs on Chinese electric vehicles. If Donald Trump is re-elected as the new U.S. president in November, he may take more action. After all, in his previous term, he imposed tariffs on $300 billion worth of Chinese goods.

The final piece of the puzzle is the blockade of the Red Sea itself. If the destination of Asian goods is the Mediterranean and Europe, sailing around Africa via the Cape of Good Hope will add two weeks to the journey, meaning more ships will be needed to maintain trade levels. According to AXSMarine, although 1 million TEUs of new ships have been put into use this year, the proportion of idle fleets has fallen to 0.6%. This is the lowest level since February 2022 and far below the normal healthy level of around 3%.

All of this is very convenient for shipping companies whose profits are closely related to freight rates. The larger their exposure to spot prices, the better. Israeli shipping company ZIM, worth $2 billion, was one of the first to divert from the Red Sea, with about 65% of its contracts signed at spot rates, pushing its stock price up more than 170% since mid-December. Danish Maersk Group has only risen 15%, with spot contracts typically accounting for only 35%. But given that fixed contracts are usually renegotiated twice a year and shippers often levy contingency fees, Maersk is unlikely to miss out on this lucrative trend altogether.

The noise surrounding the expanding demand for tariffs, economic recovery, and port strikes may dissipate later this year. But more than six months after the Houthi armed attack, shipping companies such as Hapag-Lloyd have shown no sign of wanting to return to the Suez Canal. Freightos estimates that freight rates on certain routes may rise to $9,000 in the coming months.