As disruptions in the Red Sea continue, freight rates have doubled, according to a new report from HSBC Global Research, and if not resolved by the end of the first quarter, these disruptions could keep rates elevated for much of 2024.

In a January 10 report on Global Container Shipping, analysts at HSBC said ongoing disruptions in the Red Sea have brought back debates around the fragile supply chain and comparisons with the 'Ever Given' Suez Canal blockage and COVID-19.

"Diversion of ships from Suez Canal to around the Cape of Good Hope could impact potential 20% of containerised trade and drove spot rates to pre-COVID-19 peak," the report said, adding that container shipping stocks have rallied by up to 80%, led by ZIM.

HSBC noted that various outcomes are possible.

"There is little merit in predicting the outcome of the geo-political conflict. Our base case is that given the overcapacity and lack of container demand, a re-run of the COVID-19 situation is less likely but could keep rates elevated for at least 1H24," it said.

"If resolved in the coming days, freight rates would collapse back to December levels and so will share prices, in our view. However, if not resolved by the end of 1Q24, we could see a domino effect on the supply chain, higher rates in upcoming contract negotiations, accelerated restocking and significant profits vs current expectation of breakeven," it added.