News Flash

Container ships avoid Red Sea; situation change not guaranteed: Xeneta

19 Feb '25

3 min read

Container ships avoid Red Sea; situation change not guaranteed: Xeneta

Pic: Adobe Stock

Insights

Though a ceasefire in the Middle East has raised hopes of a large-scale return of container ships to the Red Sea, most container ships are still sailing around the Cape of Good Hope and there is no guarantee the situation will change this year, Xeneta said.
But if that happens, it could see freight rates collapse due to increased capacity in the market caused by carriers taking the shorter route.

Though a ceasefire in the Middle East has raised hopes of a large-scale return of container ships to the Red Sea, the majority of container ships are still sailing around the Cape of Good Hope and there is no guarantee the situation will change this year, according to an analysis by Xeneta.

But if that happens, it could see freight rates collapse due to increased capacity in the market caused by carriers taking the shorter route through the Suez Canal coupled with record-breaking deliveries of new ships, the Norway-based ocean and air freight rate benchmarking and market analytics platform said in a blog post.

With average spot rates still up by 142 per cent from the Far East to the US East Coast, 100 per cent into North Europe and 135 per cent into the Mediterranean, this presents a conundrum for both carriers and shippers when agreeing the ‘right’ price to strike during long term contract negotiations.

While comparing long-term contracts that entered validity on January 1, 2025, against those from January 1, 2024, rates are increasing on seven out of the nine global front-haul trades included in the Xeneta top 13 trades.

From the Far East to North Europe, long term rates are up by 57 per cent compared to a year ago. From the Far East to US East Coast and US West Coast, new long term rates are up 44 per cent and 64 per cent respectively.

On all of these trades, the new long term rates are considerably below the current average spot rates.

There is a clear difference in the rates being offered by carriers for long-term contracts lasting less than six months compared to contracts lasting more than six months, Xeneta said.

From the Far East to North Europe, carriers were agreeing discounts of 28 per cent if shippers agreed to a contract greater than six months. From the Far East to US East Coast and US West Coast, the discounts were 13 per cent and 2 per cent respectively.

“This is a fascinating negotiating dynamic between the seller and buyer,” Xeneta notes. On the one hand you have the seller trying to incentivise longer-term agreements to manage risk and protect market share. On the other hand, you have the buyer doing everything possible to keep their options open for as long as possible while not spending more than necessary.

Fibre2Fashion News Desk (DS)

More Textiles News - Norway...