What Happens When the Suez Canal Reopens?
A critical question concerns the reopening of the Suez Canal. Once the canal resumes normal operations, it is expected to take 2-3 months for shipping activities to stabilise. During this period, freight rates are anticipated to drop rapidly due to overcapacity. This overcapacity arises as the usual shipping routes, which bypass Africa, will be reinstated, creating a temporary surplus of available shipping space. Additionally, several other factors, such as fuel costs, labour availability, and port efficiency, will influence how quickly the market normalises. However, the exact timeline for these changes remains uncertain, adding to the market's volatility.
Why Do We Have a Container Shortage?
The container shortage is another significant concern plaguing the industry. European shipping routes have been heavily impacted by the crisis in the Red Sea, forcing many vessels to take the longer route around Africa. This detour has strained the African route, which was originally designed with limited capacity. The sudden increase in ships has led to longer voyages and increased transhipment activities. As more and more ships compete for access to ports, congestion has become a serious problem. Consequently, many containers are not returning to their points of origin on time, exacerbating the container shortage issue. This shortage is not just a logistical challenge but also an economic one, as it drives up freight costs and disrupts supply chains.
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