Suez Canal remains blocked, stiff freight rate hikes expected
Global freight markets have been plunged into further chaos this week with the continuing blockage of the Suez Canal now accompanied by rumors of fresh freight rate hikes around the world, sources told Fastmarkets.
Transit through the pivotal Suez Canal shipping lane has been blocked by the large containership Ever Given since late on Tuesday March 23, creating a traffic jam of more than 100 vessels.
As of 6pm Beijing time on March 25, the ship remained aground and wedged in the bank of the canal. Seven tugboats were attempting to refloat the vessel. The stranded ship is situated in the single-lane southern portion of the Suez Canal, through which all vessels must pass.
More freight pain ahead
Market participants told Fastmarkets on Thursday that the current crisis was likely to lead to an even more challenging freight market environment in the coming months.
Brent Crude oil prices - a key indicator for freight rates - rose 5.7% Wednesday amid the disruption to markets caused by the blockage, although they stabilized a little in early Thursday trading.
“This situation will not be resolved until Sunday or Monday at least, when it will be easier to dredge out the vessel due to a higher tide,” a South Asian steel trader told Fastmarkets.
“An overall delay of one week may not affect the metals markets too dramatically, but it certainly will affect vessel scheduling,” he said. “Things were already bad with delays in port operations, and now vessels coming into port out of schedule will make everything even worse.”
One alternative for vessels at anchor outside the Suez Canal would be to pass around the Cape of Good Hope at the southern tip of South Africa, he added, but that would be more costly for vessel operators and could add another seven or eight days to journey completion times.
“This will affect freight prices in the next two months because vessel operators will pass on their losses [from the Suez blockage] to customers once this mess is sorted out,” a second South Asian steel and stainless scrap trader said.
“It will affect EU-Asia voyages and it will lead to more container shortages and port congestion,” he said.
Some ports will be relatively empty right now due to the blockage in the Suez Canal, he added, but once traffic in the waterway gets moving, it will mean many vessels will start arriving together, out of schedule, and that could cause further problems.
A Taiwanese steel trader said the initial crisis in the canal would be soon resolved, but the disruption would lead to more freight price increases.
Rumored rate rises
Even before the dust settles on the Suez Canal blockage, steel market participants had reported rumors of freight-rate increases this week. It is not known if these potential rate increases will be directly caused by the blockage or if they were already planned, but sources said the crisis in the Suez Canal is certainly not helping the situation and would have a knock-on effect on all freight routes.
Container freight rates for scrap voyages from Europe to Bangladesh are rumored to be rising as much as $800 per 20ft container for April sailings, an exporter source told Fastmarkets. The uncertainty over the rate increase has stopped scrap offers from the region to Bangladesh dead in their tracks this week, he said.
Fastmarkets’ price assessment for steel scrap, shredded, containerized, import, cfr Bangladesh was $445-455 per tonne on Thursday, down from $460-465 per tonne a week earlier.
April-sailing freight rates for the Brisbane, Australia-Bangladesh route have risen to $1,800 per container, Fastmarkets understands, up from previous quotes of $1,500 per container in late February.
The Taiwanese trading source said he had heard that freight costs from the US West Coast to Taiwan could rise by as much as $400-600 per container for April. He said the rate increase has been a major factor in US suppliers refusing to drop offer prices any further.