KAIKY - Red Sea attacks: Ocean freight rates shipping firms' valuations sail higher

2023-12-22 05:56:00 ET

Ocean freight rates have shot up, while shipping companies' valuations are on the rise as more ships avoid the Red Sea after attacks by Yemen's Houthi rebels on vessels disrupted the key global trade route.

The total market capitalization of the world's biggest publicly-listed shipping companies climbed by ~$22B since the Houthi attacks gathered pace last week.

This is because more ships are diverting from the trade route under conflict amid high insurance costs. Ships are now opting to sail around Africa instead of traveling through the Suez Canal, which adds up to 14 days to the journey, drives fuel costs higher and impacts vessel supply. Around 25%-30% of global container shipping volumes pass through the Suez Canal.

Ship operators are now quoting higher freight rates to offset these added costs. Maritime research firm Drewry's World Container Index increased 9% to $1,661 per 40-foot container this week, 17% higher than average pre-pandemic rates.

According to CNBC , logistics managers on Thursday were quoted an ocean freight rate of $10,000 per 40-ft container from Shanghai to the U.K., compared to last week's $2,400.

"We do not expect disruptions to last long enough to have a meaningful impact on global shipping's supply-demand balance in the medium term," said Fitch Ratings. "The disruptions may increase annual container contract rates for the affected routes if they last for more than two quarters, which is unlikely in our view."

Compare the key stats of the top 10 publicly-traded shipping companies here .

More on shipping

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• BP is latest company to halt voyages through Red Sea; Oil on watch
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