Freight rates decline slightly amid geopolitical tensions in Red Sea
Date
2/11/2024 7:05:34 AM
(MENAFN) Over the past two weeks, there has been a slight reduction in freight rates following a period of sharp increases driven by geopolitical tensions in the Red Sea. However, despite the recent dip, current rates remain significantly higher than those observed last year.
According to data compiled by a Turkish news agency from the Drewry World Container Index, the composite index for 40-foot containers stood at USD1,382 on November 30.
The escalation of tensions in the Red Sea, including attacks by the Iranian-backed Yemeni political organization, the Houthis, on vessels linked to Israel in the Bab-el-Mandeb Strait, prompted shipping companies to reroute their vessels around the Cape of Good Hope.
This decision, which extended travel times by up to two weeks, resulted in a doubling of freight rates due to counter-attacks against the Houthis led by the US and UK. Consequently, ship traffic in the Red Sea significantly decreased.
Although tensions in the Red Sea have persisted for nearly three months, the rapid increase in freight rates has slowed. However, prices remain elevated. Over an eight-week period, rates climbed to USD3,964 on January 25, marking a 186.8 percent increase, fueled by heightened tensions in the region and vessel rerouting.
As of February 1, the composite index per 40-foot container stood at USD3,824, and by February 8, it had declined to USD3,786, reflecting a two-week decrease of 4.5 percent. Despite this recent downturn, rates remain 90 percent higher year-on-year and 174 percent above the level observed on November 30. Additionally, they are up 167 percent compared to pre-coronavirus pandemic levels.
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