Chinese companies exporting goods to European markets face higher shipping costs resulting from the ongoing Red Sea crisis, as per Fitch Ratings. This supply-chain disruption has less overall impact on Chinese exporters than in the pandemic years of 2021-2022, because of reduced external demand for Chinese goods and growing container shipping capacity, which is likely to expand further this year.

Around 60 per cent of Chinese trade with Europe typically transits through the Suez Canal. Some vessels now face detours and heightened costs as they have to re-route via the Cape of Good Hope, lengthening the transit by 10 to 15 days. Shipping freight rates have increased, particularly for container shipping. Some smaller-volume goods have been shifted to rail, notably on the China-Europe railway line, where utilised capacity for goods transport from China to Europe has increased significantly from the pre-crisis level, as per the report.

China-flagged ships, however, may have been less affected by the crisis, with press reports suggesting some vessels from Chinese shipping lines still travel via the Suez Canal. Major Chinese seaport operators have not experienced significant congestions or loss of volume at their ports. In addition, bulk cargo ports are less affected than container ports.

Shipping costs are also significant for other major products Chinese companies sell to the European market, such as furniture, but Fitch Ratings expect exporters to pass through some additional expenses to customers, therefore mitigating the negative impact on profit margins.

Fibre2Fashion News Desk (RR)

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