The reconfiguration of global supply chain networks following conflict in the Red Sea and unrest in the wider Middle East is prompting a reassessment of how ocean container shipping and various trade routes intersect and differ.
Xeneta said exports of refrigerated cargoes out of Europe are one example of how previously held views on the way these trades behave must be reassessed as new sailing routes impact freight rates and container movements — particularly the shifting market dynamics on the two reefer trades from North Europe to the Persian Gulf and North Europe to Southeast Asia.
Europe's exports of refrigerated cargo are big business, with a significant proportion of containers transported on long-term shipping contracts.
North Europe to the Persian Gulf
Xeneta noted that since the end of 2023, its long-term contract market average for a 40ft Reefer High Cube (RH) on the trade from North Europe to the Persian Gulf (and Gulf of Oman) has increased 58% to stand at US$3,570 on September 19.
The data is based on long-term rates signed within the past three months rather than all valid contracts in the market.
Xeneta noted that this measure provides insight into the long-term rates being offered at that particular point in time.
For the period, freight rates on this trade jumped US$950 per RH right at the start of 2024 as the market faced the reality of 90% of transits through the Bab el-Mandeb Strait no longer happening.
"Most container lines changed the normal sailing route between North Europe and the Far East by turning away from the Persian Gulf and the Gulf of Oman and heading south towards the Cape of Good Hope as soon as ships had passed the northern tip of Sumatra on the fronthaul," the analysis from the ocean and air freight rate benchmarking and market intelligence platform, added.
It noted that the same route was taken on the return journey as carriers needed the ships back in the Far East as soon as possible to limit the impact of extended transit times on weekly schedules.
"As with almost all efforts to mitigate the impact of the Red Sea conflict – there are unintended consequences to the best of intentions," Xeneta said.
"By changing this sailing route, the ships missed numerous port calls in the Persian Gulf and Gulf of Oman, which would have ordinarily been used to deliver reefer cargoes on the backhaul voyage en route from North Europe to the Far East," Xeneta said, adding that when capacity is cut and services adjusted it is almost inevitable that freight rise.
"And that is exactly what happened on the reefer trade from North Europe to the Persian Gulf, with average long-term rates increasing by US$300 from early January to the current rate of US$3,570 per RH," the report further said.
North Europe to Southeast Asia comparison
Meanwhile, according to Xeneta, at the end of 2023, there was just a US$64 difference in the long-term reefer rates on trades from North Europe to the Persian Gulf and North Europe to Southeast Asia.
But by September 19, the spread between these trades had increased to an eyebrow-raising US$959 per RH.
"This serves as a good example of how the Red Sea crisis has severed the relationship between two seemingly similar trades and set them on entirely new market trajectories," Xeneta said.
While the rerouting caused by the Red Sea conflict caused massive disruption in the Persian Gulf due to missed port calls, the report noted that it had "no such impact on trade with Southeast Asia."
Xeneta said after the initial jump in January 2024, long-term contract rates from North Europe to Southeast Asia set into a 'new normal' and have mostly been moving sideways ever since.
The market high-low range on this trade in 2024 is between US$2,250 and US$3,000 and currently sits a meagre US$161 per RH lower on September 19 compared to January 1.
Ocean network changes impact demand
Xeneta noted that the demand profile between these trades has also been changed by the reconfiguration of ocean supply chains in 2024.
The reefer trade from North Europe to the Middle East is 40% bigger in terms of volume than the trade from North Europe to Southeast Asia.
However, the number of reefers moved into the Middle East grew by 2.5% year-on-year in the first seven months of 2024.
Meanwhile, volumes on the trade to Southeast Asia are up 6.8% in the same period. Moreover, demand for reefer movements into Southeast Asia from North Europe has been higher year-on-year in every month of 2024 so far, with the exception of June.
"Whether this is due to reefer goods being priced out of the market or a lack of port options for reefer shippers is difficult to say, but the impact on demand is clear," the Xeneta analysis said, pointing out that global demand for reefer container transport, is also at an all-time high.
In the first seven months of 2024, reefer demand is up 5.1% compared to 2023.
In addition, the report noted that a monthly record has been set every month with the exception of April (which only narrowly missed setting the highest-ever total for that month."
"The middle of the year is traditionally the low point in terms of demand volatility for these reefer trades, with Q4 tending to be peak season," Xeneta said.
"This raises the question of how they will behave in the three months ahead – should we expect long-term rates to increase on both trades?"
Xeneta noted that given what has been seen during 2024 to-date, perhaps the trade to Southeast Asia is best placed to cope with increased seasonal demand, while shippers using the reefer trade to the Middle East could face a challenge moving their refrigerated goods.
