Sea freight charges up 500pc on delays, longer routes
Monday June 17 2024
Containers at the port of Mombasa, Kenya. PHOTO | COURTESY
An acute container shortage in China is driving global freight charges high, prompted by ships taking the longer route around the Cape of Good Hope instead of the Suez Canal, where Yemeni fighters, Houthi, have disrupted marine transport.
Traders in Kenya have raised concerns over the sharp increase in sea freight charges, paying some shipping lines Ksh1,113,500 ($8,500) for a 40ft container from China to Kenya, from Ksh222,700 ($1,700) in April – a 500 percent rise.
“I was to ship cars from Hong Kong and was hit with a Ksh1,179,000 ($9,000) bill from previous Ksh458,500 ($3,500) for a 40ft container,” said Jason Nyanjui, a Kenyan trader.
One of the biggest global shipping lines, CMA CGM, announced an Asia-North Europe a rate of Ksh786,000 ($6,000) per 40ft container from June 1.
Shippers Council of Eastern Africa acting Chief Executive Officer Agayo Ogambi warned of serious cargo supply disruption: “Ocean carriers are skipping ports or decreasing their time at port and not picking up empty containers, in an effort to keep vessels on track for delivery.”
This has affected Kenyan exports, with tea and coffee piling up at warehouses. Exporters in Mombasa say about a quarter is held up due to delays in shipping schedules for 2-3 weeks due to longer routes.
“Ship turnaround time has remained a challenge as some shipping agents with contracts with tea exporters have either delayed picking up tea at the Mombasa port or suspended their trips. This has seen the volumes of the tea exported to Russia and neighbouring countries such as Kazakhstan, Kyrgyzstan, Uzbekistan and Azerbaijan significantly dwindle,” East African Trade Association managing director George Omuga said.
Sea freight cost has risen from Ksh349,018 ($2,442) to ship a 40-foot container to Russia -- Kenya's fifth biggest market for the beverage — in October to Ksh930,857 ($6,513) today.
Since November last year, the Houthi fighters have been disrupting global supply chain. In December, they began firing at ships headed to Israel or operated by Israeli entities to show solidarity with the Palestinian population in the Gaza Strip.
Yemen controls the Bab al-Mandab Strait, which serves as the gateway to the Red Sea and leads to the Suez Canal.
About 12 percent of global trade and 20 percent of global container traffic pass through the Suez Canal. Because of, many major shipping companies have suspended travel through the canal, diverting ships from Asia to Europe around the Cape of Good Hope, which adds about 10 days to the journey. This longer route means higher costs for shipping lines.
The detour around Africa increases fuel costs by 40 percent, according to Maersk Shipping Line. The attacks have also extended further into the sea, prompting ships to lengthen their routes. German shipping company Hapag-Lloyd is currently avoiding the Gulf of Aden entirely. Meanwhile, the French operator CMA CGM continues to sail through the Red Sea and Suez Canal, escorted by the French Navy. Despite this, a significant portion of their fleet has been redirected to Africa.
Data from the United Nations Conference on Trade and Development (UNCTAD), traffic through the Suez Canal is down by 80 percent year-on-year due to the Red Sea crisis.