Global maritime transport costs, particularly those associated with servicing European markets, are on the rise again. The increase comes as global demand for exports begins to grow after a weak year in 2023. The World Trade Organization (WTO) forecasts a 2.6% increase in goods shipments this year.
According to the Drewry World Container Index, which monitors the market, in the third week of June alone, freight prices for a standard 40-foot container increased by 7% — resulting in a 233% increase compared to the same period last year.
Overall, global shipping rates have nearly doubled since the end of April – although they remain well below the peak reached during the COVID-19 pandemic.
The main reason for the increase is the current disruption in the Red Sea, where Yemeni Houthi militias have been attacking ships in the region due to their owners’ or operators’ ties with Israel. The actions are a response to Israel’s bombing of Gaza.
The tensions have led commercial shipping companies to reroute their paths, sailing around the African continent instead of using the Suez Canal.
Since December, there has been a 50% drop in traffic through the Suez Canal, offset by a 70% jump in voyages around the less direct Cape of Good Hope, according to IMF’s PortWatch data. The change has added about 40% to the travel distance, causing shipping delays of 2 to 5 weeks and increasing round-trip trade costs to Europe.
Another consequence of ongoing disruption has been a shortage of shipping equipment, especially containers. “The diversion around South Africa requires more ships to maintain supply. The average travel distance of a container in 2024 is 9% longer than it was in 2022,” said Jan Hoffmann, trade expert at the United Nations Conference on Trade and Development (UNCTAD) to DW.