transit disruption charges

Tankers continue to sail, but the number is diminishing as risk of assaults comes at a cost Most tankers are continuing their journeys, but this doesn’t mean the tanker market is not affected by the threat of attacks on vessels. Spot rates, including those for very large crude carriers (VLCC) chartered on this route from the Persian Gulf, are under strain. And in the meantime, insurance market premiums for Red Sea crossings have surged. So different from what some may think, the Red Sea - Suez Canal shipping route isn’t blocked, but it is certainly increasingly affected.   Container rates on most effected Asia-Europe route more than tripled while the global average doubled Container spot rates on one of the largest and most affected global trade routes, Asia-Europe, have tripled compared to early December in the first week of January. This marks the provisional end of downward trending prices after earlier record-breaking levels during the pandemic. Spot rates, including surcharges on the Shanghai-Rotterdam route, reached $ 4,400 on 11 January compared to $1,170 at the start of December for a standardised 40-foot container. Most trade lanes across the world are indirectly affected, and global spot rates have doubled over the same period. Several US east coast-bound vessels from Asia have shifted away from the Panama Canal, which is suffering from a drought, and are now also impacted by the troubles in the Red Sea. This comes on top of already extended sailing times.     Container rates to Europe have risen rapidly since Red Sea troubles started World container index (WCI), freight rates in $ per FEU (40 ft container)   Container rates rebounded quickly and more may follow Container sport rates have gone up rapidly following the capacity disruption and rates may go up even further. But we are still far away from the record-breaking levels of early 2022. Current spot prices still hover below half of this peak for the Shanghai – Rotterdam route. A complicating factor for the market is that the world simultaneously faces another chokepoint –  the Panama Canal – also a vital link for trade, and the coinciding Chinese New Year may lead to extra friction this year. But on the other hand, demand for goods is running far less hot than over the pandemic, and with a range of new-build vessels online and still underway there’s much more capacity available. In addition, port operations are generally also running relatively smoothly.   Red sea crisis in a different category for shipping than the pandemic disruption The current market balance of supply and demand is less strained than when Evergiven blocked the Suez Canal in 2021, which should limit the upside for container rates. Having said that, the impact ultimately depends on how long it takes to resume shipments. Rebalancing takes time as we have seen before. If extreme weather events add to the disarray, elevated freight rates could easily be around for longer. But the current disruption also masks underlying overcapacity following a massive inflow of vessel capacity. When the most pressing Red Sea disruption is resolved we can gradually expect renewed downward pressure.     Mounting surcharges complicate the market The container shipping sector is subject to various surcharges on top of base freight rates and several of them, including the bunker adjustment (BAF) and from this year the Emissions surcharge (EMS) are covered by clauses in contracts. But the list of surcharges has continued to expand in response to several events in the last few years. Port congestion surcharges (PCS) were introduced over the pandemic and amid the current Red Sea crisis, container liners have implemented ‘transit disruption charges’ (TSD). This extra fee, combined with a peak season surcharge ahead of the Chinese New Year (PSS), has pushed up container rates. These fees differ among container liners but have become a dominant factor in pricing. Consequently, container transport pricing has turned increasingly opaque and hard to predict for shippers and logistics services providers.