Container spot rates rocket even higher as Red Sea crisis drags on

It’s now crystal clear that container ships will not return to the Red Sea anytime soon. Lengthy detours around the Cape of Good Hope have already pushed spot container rates far above pre-COVID levels, and rates continue to climb.

Yet another commercial ship was hit by Houthi rebels on Wednesday, the bulk carrier Genco Picardy, owned by New York-based Genco Shipping & Trading (NYSE: GNK). This was followed by another barrage of coalition airstrikes in Yemen, then more Houthi attacks on shipping on Thursday.

The Drewry World Container Index (WCI) Global Composite jumped to $3,777 per forty-foot equivalent unit for the week ended Thursday. It’s now up 173% year to date.

With the exception of the COVID boom period in December 2020 through October 2022, this week’s global spot-rate reading is the highest on record since the WCI debuted in June 2011.

This was supposed to be a terrible year for container lines, courtesy of a tidal wave of newbuilding deliveries. According to Alphaliner, 2.3 million TEUs of new capacity were delivered last year, with an additional 3.2 million TEUs set to arrive in 2024.

But ocean shipping rates are acutely exposed to geopolitical events. The Houthi attacks, which have forced container ships to reroute en masse around Africa’s Cape of Good Hope, changed the supply-demand equation. Linerlytica now predicts “windfall earnings for carriers in Q1 2024.”