Fitch Ratings reports that the decision to re-route ships away from the Suez Canal due to attacks in the Red Sea imposes additional costs on shipping companies. Container shipping is expected to experience significant freight rate increases, followed by bulk carriers, while limited impact is predicted for tankers already enjoying high rates. About 25%-30% of global container shipping volumes pass through the Suez Canal, and disruptions may lead to rising freight rates. Major shipping companies, including Maersk and Hapag Lloyd, have announced re-routing, with some imposing surcharges on routes to or from the Middle East. Rerouting around Africa could increase travel time by 50%, potentially reducing global container shipping capacity by 10%-15%. While disruptions are not anticipated to have a lasting impact on the supply-demand balance, they may affect annual container contract rates if prolonged. The report draws parallels with past port congestion issues and highlights the interconnectedness of global supply chains.

SOURCE:GOOGLE