Red Sea surcharges and the power of uncertainty…

When it comes to the Red Sea crisis, the cause has been well documented over the past few months. "So, let’s take a closer look at the effect, " says Xeneta in its latest update.

"Diversions away from the Suez Canal have hit ocean freight trades hard from Asia to the Mediterranean, North Europe and U.S. East Coast. However, it could be argued cargoes moving in the opposite direction on the backhauls have been hit even harder by these surcharges."

Effect – North Europe to Far East
Moving from $400 per FEU by the end of 2023 to more than $1,000 per FEU by mid-February, market average spot freight rates have gone up by 150 percent in six weeks.

"Within these market average spot rates, some shippers have been paying upwards of $1,000 in additional costs while others have managed to avoid surcharges altogether with an average of $591 per FEU."

Effect – Mediterranean to Far East
Surcharges are spread in the range of $400 (mid-low) and $1,100 (mid-high) per FEU with an average of $639, the update added.

Cause and effect - how to make sense
The effects of the crisis are highly individual, and therefore it is very much a case of every business looking after its own individual interests. "Shippers, carriers and freight forwarders are fighting as hard as they can and entering negotiations with the single aim of reducing the effect of the crisis on their business as much as possible – whether that is through surcharges or service reliability."

For a standard FEU, the Red Sea surcharge for exports out of the Mediterranean on long-term contracts sits higher than North European exports with a spread of $162. While the market low for both of these trades sits at $400, the market high sits at $1,295 for the Mediterranean and $750 for North Europe.

"Bringing a reefer out of North Europe heading for the Far East, the average surcharge sits at $1,007 per box."