Chinese New Year Approaches + Red Sea Attacks: Short-Term Surge in Asian Container Demand

Source: 5688.cn

Container leasing platform Container xChange reports that in the past two months, shipping companies have ordered over 750,000 TEUs of ISO containers in China. This surge in demand is attributed to container shipping companies avoiding the Red Sea and opting to take the longer route around the Cape of Good Hope, absorbing market capacity.

With the Chinese New Year approaching, freight agents and shippers are rushing to ship goods before the manufacturing shutdown in China during the week of February 10. The market is facing additional short-term pressure.

Christian Roeloff, co-founder and CEO of Container xChange, notes that the disruption in the Red Sea will prompt retailers to rely on buffer inventory to keep store shelves stocked, but reaching a critical state of shelf depletion and product shortages becomes unavoidable. He believes this situation should lead to a new approach in inventory management.

"As supply chain disruptions become a norm, retailers must get used to maintaining higher inventory levels... As we witness continued disruptions in the global supply chain in the medium to long term, we will see an enhancement in the resilience of supply chains," says Roeloff.

In recent weeks, container shipping rates on routes dependent on the Red Sea, such as Asia to Europe, have significantly risen due to tight capacity, increased insurance, and fuel costs. Roeloff states, "The average rate for mid-Europe this week is around $5,400 per 40 feet, up $1,500 from the previous week, three times the rate from the previous week."

As of January 11, spot container prices in the East Latin America region have risen by 48% in the last 30 days.

"We anticipate rate increases to stabilize in the medium to long term. We have enough capacity that can be consumed over a longer transit time but won't result in a permanent capacity crunch," says Roeloff.

Out of 700 vessels transiting the Red Sea, about 500 have been affected by rerouting, impacting the market. Roeloff offers three recommendations for companies dealing with this disruption: having sufficient safety stock is crucial to absorb shocks, diversification through networks and suppliers can eliminate single points of failure in the supply chain, and finally, Roeloff suggests leveraging technology to improve the identification of issues on the schedule and using real-time information to strengthen decision-making.

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