Carriers are facing many uncertainties as we enter 2024. Unstable freight rates caused by vessel overcapacity will be a major topic during the upcoming contract negotiation period. Experts are predicting a four-month window for most Asia to U.S. contract negotiations to be finalized starting January 1 and ending April 30. Unfortunately for the carriers, they don’t have a four-month window to resolve the turmoil that is currently engulfing Red Sea transit.
Continued attacks by Houthi rebels in the Red Sea have carriers scrambling for a coherent strategy moving forward. The majority of carriers have abandoned moving containerships through the Red Sea due to the risks involved. They are opting to reroute their ships to sail around the Southern tip of Africa also known as the Cape of Good Hope. This new route does add additional transit time and is more costly due to the extra fuel that is burned. Carriers recognize this decision is causing distress for shippers that rely on fast transit and low costs for their cargo. However, they have made it abundantly clear that their number one priority is the safety of their crews and shipper cargo.
The few carriers that did allow containerships to move through the Red Sea have had mixed results. Maersk resumed operations through the Red Sea only to suspend services after one of their ships was attacked on December 30. The attack caused Maersk to immediately suspend all transits through the Red Sea and reroute vessels through the Cape of Good Hope. Maersk did state that services through the Red Sea could resume but did not provide any clear dates on when this might happen.
It’s safe to assume that as long as Houthi rebels continue to create havoc in the Red Sea, the majority of the carriers are going to opt for the safer route through the Cape of Good Hope.
