Container Prices Affected By The Middle East Conflict

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Cape Town harbor used to be a vital cog in the shipping trade routes until the Suez Canal was built and now it is firmly back in the spotlight due to the latest conflict. Definitely not ideal and having been neglected for so long will still serve a purpose for replenishing vessels passing by on route to Europe or the Far East.

I was chatting to one of my logistics buddies today and it is amazing how the Middle East conflict has reshaped the container industry since last week. With shipping now bypassing the Suez Canal the alternative and only route is via the Cape Of Good Hope which is Cape Town at the tip of Africa. This will add an extra 14 days to any cargo in transit along with any additional costs which the shipping companies will definitely take advantage of.

I cannot see vessels hitting the Northern Sea Route (NSR), but there will be a few Chinese operated shipping and container companies willing to risk it due to the time differences and extra profits suddenly on offer. This I will be keeping an eye on as those ships can do double the business due to the shorter sailing times compared to one vessel transiting the Cape. If this is an option there will be companies willing to experiment and try this out and this is the perfect time and situation for the NSR to expand it's business.

Cape Town port may have done their upgrades just in time and the local economy should benefit from the sudden extra shipping traffic. Food supplies with fresh fruit and vegetables being delivered by the local chandlers will be the big beneficiaries of this sudden route change.

Just to give you some idea how shipping prices have escalated over the years a 40Ft container being delivered to a SA port back in 2020 was in the region of $3400 and that was priced at $9800 last week until the new conflict broke out. That price is now between $11400 and $11700 per container. On top of this there are now shipping delays so more planning is required by any importer exporter.

10 years ago this would not have been a factor as planners did not plan so close to the deadline dates and is only a recent change in retailers way of thinking maximizing profits. Containers arriving on the day or day before items are running out and now they will face shortages on many imported items being out of stock for a couple of weeks. You do wonder saving a week or two of holding stock makes such a big difference to general costs compared to the running out and no sales cost and would say the lost sales are more costly.

MSC and Maersk have upped their prices adding a conflict surcharge which is $500 per 40Ft container coming to Africa even though the shipping does not pass the Suez canal for these particular delivered routes. Just think what a perfect opportunity to make more bank when these situations occur as a vessel carrying 5000 TEU's would now make an additional $2.5 million profit for doing the same work without additional costs. Insurances along with fuel have also risen due to the conflict even though these vessels are no longer travelling the conflict zone route.

Containers travelling from the East to Europe will increase far more and the expected price adjustment is in the region of $2500 per 40ft container or $3500 for refrigerated. Bad news for consumers as this will directly impact any price that was once planned for so inflation will continue to rise the cost of living on imported goods. These are the things we fail to realise as the fuel rice rising is just the tip of the ice berg and there are so many other things directly impacted.

Another thing that logistics companies need to worry about is the impact on container supplies due to the extended route the vessels are now using. The added 12-14 days ships are now travelling via the Far East to Europe means those containers are now tied up for longer than usual and there will be shortages if this war continues into April and May or even longer. What we saw happening in January and February was an excess of container stock available and this will be long gone before the end of March.

Posted Using INLEO