Successive “spikes” in international shipping prices due to geopolitical conflict

In the first two trading days of this week, the container transport index (SCFIS(Europe)) futures listed on the Shanghai International Energy Exchange rose continuously, with the main contract accumulating more than 20%, standing at the highest point since its listing. Recently, due to frequent attacks on cargo ships in the waters near the Red Sea, a number of international shipping companies announced the suspension of transport and navigation through the Red Sea, which is the main reason for the impulse of international shipping prices.

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Fu Xiaoyan, director of shipping research at?Nanhua Futures, told the Economic Observer: "The Red Sea waters are an important area via the Suez Canal, which is an important channel for the Asia-Europe route. Nowadays, container ships on the Asia-Europe route can only be forced to go around the Cape of Good Hope if they want to pass through, and the shipping distance is lengthened, and the freight cost naturally rises.

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According to Xinhua News Agency, recently, due to a number of ships travelling to the Red Sea waters by Yemen's Houthi attack, four international shipping companies have announced the suspension of navigation in the Red Sea. The United States Central Command said: "The latest round of attacks once again demonstrates that the actions of the Houthis pose a significant risk to international maritime transport."

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It is understood that the?Mandab Strait - Red Sea - Suez Canal, as a transport hub connecting Asia, Africa and Europe, is one of the busiest routes in the world, and the passage of the route is critical to the international supply chain. The Suez Canal passes more than $1 trillion in goods annually, handling about 12 per cent of the world's cargo shipments, 30 per cent of container trade and nearly 10 per cent of crude oil trade.?The Mandab Strait is the throat of the Suez Canal. Ships travelling through the Suez Canal must enter and exit the Red Sea through the Mandab Strait in the southern section of the Red Sea.

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From the impact on freight rates, Haitong Futures analyses that the increase in fuel costs after the bypass is basically the same as the tolls to be paid for passage through the Suez Canal; and given the high demand for voyage stability from European customers, shipping companies need to increase capacity to maintain a reasonable frequency of sailings (including the Far East-Mediterranean route, which is also facing the problem of the bypass), and then continue to This will continue to shrink the supply of effective capacity. Overlaying the year-end shipment tide, the expansion of freight demand, some shipping companies are reported to have been full of cabin space, so the shipping company in the original price increase on the basis of there may be room for further increases.