Aviation article(s)
February 6, 2024

Any potential ceasefire from ongoing tensions in the Red Sea could help ease geopolitical challenges in the region and restore smooth trade flow in the Red Sea, according to a new HSBC Global Research.


The report noted that a ceasefire negotiation is underway as overall transits via the Suez Canal dropped 63% versus the first half of December, with container ships being most impacted (down 81%).


"Houthi militants continued to attack commercial vessels until January 31, and now, CMA CGM, the last major liner operating in this region, has also decided to divert its vessels," HSBC said.


"However, a ceasefire negotiation is underway between Israel and Gaza. Any potential ceasefire could help ease the geopolitical tension in the region and restore smooth trade flow in the Red Sea," it added.


For container freight rates, during the week ended February 2, the Shanghai Containerised Freight Index (SCFI) grew 1.8% week-on-week versus a decline last week.


HSBC noted that this rebound was driven by the SCFI Shanghai-US rates, which grew by 4%-13% on the partial pass-through of the proposed February 1 general rate increase (GRI) of US$1,000/FEU.


Meanwhile, the Shanghai-Europe and Mediterranean routes softened further by 4-5% week-on-week and are now 7-12% lower versus the recent peak.


Meanwhile, the China Containerized Freight Index (CCFI) grew 4.4% week-on-week.


"We think spot rates could soften further on factory closures and shipment slowdowns following the Lunar New Year (LNY)," the HSBC report said.


It added that tanker rates increased in both clean and dirty, with crude tanker transits via the Suez Canal down 46% versus the first half of December.


The Baltic Dirty Tanker Index increased 11% vs end-November.


The report added that within this, the cross-Mediterranean (TD19) route increased by 74%, while the Scotland to Germany route (TD7) increased by 50%.


It noted that the Red Sea crisis also failed to lift the dry bulk rate — and the Baltic Dry Index (BDI) declined 7% week-on-week on rate weakness in Capesize and Panamax vessels.


HSBC Global Research added that this is now 53% lower than the end-November level owing to seasonally soft demand before the LNY, albeit the transits of dry bulk vessels via the Suez Canal are down 38% versus the first half of December.


"Air cargo saw strong prices and volumes ahead of the LNY. The Baltic Air Freight Index was up 6.4% week-on-week as of January 29, likely driven by the Red," it said.


Meanwhile, it added that sea disruptions in ocean shipping along with a rate spike approaching the LNY.


"Specifically, the Vietnam to Europe air freight rate rose 16% week-on-week. Overall volume also seemed to improve over the past couple of weeks," the report said.


HSBC noted that per WorldACD, global air cargo tonnes grew 5% week-on-week in the week of January 15, following 25% w-o-w growth in the prior week.

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