Red Sea difficulties could lead to congestion at ports, lead shipping rates north

A report from HSBC Global Research has warned that the Red Sea crisis could lead to congestion at ports and higher shipping rates. This would be a knock-on effect of uncertain vessel schedules and equipment shortages, caused by the displacement of empty containers. Problems could be worsened by the approaching Chinese/Lunar New Year.

The report said that, if the crisis remained unresolved in the coming weeks, it could push spot rates even higher, subsequently increasing contract rates when shipping liners negotiated their annual contracts with retailers. For the shipping lines this is good news. It would prevent a significant decline in sector profits when compared with market expectations prior to the disruptions.

The rally in rates has been caused mainly by the Asia-Europe routes, but the report noted that spot rates on other routes, including across the pacific, were also experiencing a rise in prices.

HSBC Global Research has predicted a modest rebound in global trade in 2024. World exports were expected to grow by 1.8% in 2024 and by 3.4% in 2025. However it advised caution because of downside risks that include higher interest rates, uncertainty in Chinese demand, geopolitical conflicts, and trade uncertainty.