There are projections that freight rates for global container carriers will rise in succession due to the war between the United States and Israel and Iran. As rates bound for the Middle East have jumped sharply and various expenses, including fuel costs, have climbed in tandem, observers say it is inevitable that rates on other routes will also rise.
According to the shipping industry on the 11th, the Shanghai Containerized Freight Index (SCFI) stood at 1,489.19 as of on the 6th, up 11.7% from the previous week (on Jan. 27). After recording 1,656.32 at the end of last year, the SCFI fell for six consecutive weeks, but on Jan. 27 it rose 6.5% from the previous week and has climbed for the past two straight weeks.
The rise in the SCFI was influenced by higher rates on Middle East routes due to the recent war between the United States and Iran. However, other factors such as higher oil prices from the recent war and reduced container ship capacity have hardly been reflected. For this reason, many analysts say the longer the war drags on, the faster container ship rates will rise.
In fact, as international oil prices climb, prices of high-sulfur fuel oil (HSFO) used as ship fuel are also surging. The average international HSFO price was $439 per ton (t) last month, but so far this month it is up 37.2% to $602.5. On the 6th, it even spiked to $698 per t.
Because of this, carriers have recently been imposing fuel surcharges one after another. Switzerland-based major carrier MSC notified shippers that starting on the 16th it will collect an emergency fuel surcharge of up to $150 per 1 TEU (1 TEU = one 20-foot container). Other carriers, which are still charging only risk surcharges for the upper Gulf and Red Sea regions, are also considering imposing fuel surcharges.
The fact that container ships are stuck in the Strait of Hormuz is also cited as a reason for the outlook of rising rates. Carriers using routes that connect East Asia and Europe via the Middle East have no choice but to procure alternative vessels or redeploy fleets, so expenses are bound to rise.
According to Alphaliner, a global shipping market analysis firm, 138 container ships with a total capacity of 470,000 TEU are trapped in the Persian Gulf inside the strait due to the Strait of Hormuz blockade by the Islamic Revolutionary Guard Corps.
There are also projections that rates in the Middle East, which have risen sharply, will continue to climb for a while. That is because, in addition to carriers imposing war risk surcharges and emergency surcharges, they are likely to pass on higher fuel and labor costs. Under a decision by the International Bargaining Forum (IBF), the international seafarers' labor-management body, carriers are paying crew on ships operating near the Strait of Hormuz an additional 100% of their salaries.
As of on the 6th, rates on Middle East routes were $2,287 per 1 TEU, up 72.3% from the previous week. The Joint War Committee (JWC) of the London insurance market also raised insurance premium rates for ships passing through the Middle East from the existing 0.1% to as high as 1.3%.
Yang Jong-seo, a senior researcher at The Export-Import Bank of Korea Overseas Economic Research Institute, said, "If the war becomes prolonged, rates will keep rising and shipping demand will shrink, which could lead to a global economic downturn."