Shipping costs and the Red Sea crisis


We have all likely seen the reports about the Houthi Rebel attacks on cargo vessels in the Red Sea, and watched this conflict escalate. Do these events on the other side of the world really affect Australian business importing from China?

Why are shipping prices to Australia being impacted by the Houthi Rebels?

The Suez Canal and Red Sea are a crucial global shipping route, through which approximately a quarter of the world’s container trade would normally pass. Yemen borders the Red Sea, and the Houthi Rebels are a militant Islamic group that consider Israel an enemy.

Since the attacks began in October, the Houthi’s have been targeting cargo vessels from US and UK. Consequently, carriers have changed shipping routes to around Africa’s Cape of Good Hope, adding considerable time and expense to container shipments between Europe, the US and Asia. The longer vessel rotations means that more vessels are required to keep up with demand.  Due to supply and demand, carriers are now able to charge more for trips between China and Australia, China to New Zealand or China to Canada. For example; we have an Australian client with a base in Canada who utilise Vara Allied's services to import goods from China. The latest quote for shipping a 20-foot container from China to Canada was four times higher than just months ago, before the Red Sea crisis. 

In addition, carriers were taking bookings for early February, but didn’t release rates for this period until only a few days before the start of the rated period. Historically this information is available well before.  Are the carriers waiting to see what happens in the Red Sea? Are they waiting to see how much they can bump up pricing and maximise profits?  If history has shown us anything, it is that war is profitable for big business. The decreased efficiency and increased uncertainty and risks leads to an increase in costs which results in the Australian importer paying higher rates.  Let’s see where rates lie when China return from holidays later this month.