Shipping container price surge to reverse due to overcapacity - logistics platform

Higher prices for containers used by merchant ships caused by attacks on Red Sea shipping are likely to fall back in three to nine months to levels seen in early December due to market overcapacity, the head of an online container logistics platform said on Wednesday.

Container prices have risen some 10% from last week in Rotterdam and Hamburg to $1,310-$1,350 per 40-foot-high cube cargo worthy unit, as Iran-backed Yemeni militants have targeted merchant ships in the Red Sea, forcing major shipping companies to change routes.

“Container scarcity has led to an increase in container prices,” Christian Roeloffs, co-founder and CEO of Container xChange, told the Reuters Global Markets Forum (GMF), as fewer containers are expected to arrive on time as they re-route around the Cape of Good Hope on Africa’s southern tip.

Oil major BP (BP. L) paused all Red Sea transits, and a slew of top shipping companies including Maersk (MAERSKb.CO) started diverting shipments normally made through the Suez Canal. The new route around Africa adds days to journey times and raises costs.

Attacks by Yemen’s Houthi militants on ships in the Red Sea are disrupting maritime trade through the Suez Canal, with some vessels re-routing to a much longer East-West route via the southern tip of Africa.

Roeloffs expected the new U.S.-led multinational operation to safeguard commerce in the Red Sea and allow passage of goods through the Suez Canal, and that, along with overcapacity in the container market, would help keep container prices in check.

Estimates foresee the re-routing of trade routes adding some 10-12 days of transit time, which Roeloffs said would soak up between 1.4 million TEU and 1.8 million 20-foot equivalent units (TEU), which is about 5% of global container capacity.

“Overcapacity in container shipping is so large that even soaking up 5% of capacity will not make a long-lasting impact on container prices,” he said, adding that he expected prices to gravitate lower to around pre-attack levels.