Container leasing platform Container xChange said shipping lines have ordered more than 750,000 teu of ISO containers in China in the past two months. The demand comes as container shipping lines avoid the Red Sea and instead detour around the Cape of Good Hope, a change that absorbs market capacity.
As the Chinese New Year approaches, the market faces further short-term pressure as freight forwarders and shippers scramble to ship before China's manufacturing industry shuts down the week of February 10.
Christian Roeloff, co-founder and CEO of Container xChange, said that the disruption in the Red Sea will cause retailers to use buffer stock to keep store shelves full, but will not be able to reach the critical state of empty shelves and product shortages. He believes that this situation should lead to a new way of managing inventory.
"As supply chain disruptions become the norm, retailers must get used to holding higher inventories... As we see continued disruption to global supply chains in the medium to long term, we will see supply chain resilience increase." Loves said.
Container shipping space prices on Asia-Europe and other Red Sea routes have risen sharply in recent weeks due to tight capacity and rising insurance and fuel costs. "The average quote in Central Europe this week was around $5,400 per 40 feet, up from $1,500 the week before and three times the previous week," Roelofs said.
As of January 11, container spot prices in eastern Latin America increased by 48% in 30 days.
"We expect the rate hikes to level off in the medium to long term. We have enough capacity that can be consumed over longer shipping times, but it won't cause a permanent capacity crunch," Loves said.
With around 500 of the 700 ships crossing the Red Sea being diverted, the impact is already being felt in the market, and Roeloff has three pieces of advice for companies dealing with the disruption. Having adequate safety stocks is critical to absorbing shocks, and flexibility can be improved by diversifying networks and suppliers and eliminating single points of failure in the supply chain. Finally, Roeloffs recommends leveraging technology to improve timelines for identifying issues and using real-time information to enhance decision-making.
