Expect the disruptions to container shipping in the Red Sea to linger into the third quarter, according to Maersk CEO Vincent Clerc .
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The ocean freight giant is still diverting its container vessels away from the Red Sea and the neighboring Gulf of Aden, instead rerouting them around southern Africa’s Cape of Good Hope, to avoid the ongoing drone and missile attacks perpetrated by Houthi militants in Yemen.
The onslaught on commercial shipping has persisted since November, forcing Maersk and chief competitors like Mediterranean Shipping Company (MSC), CMA CGM, Cosco Shipping and Hapag-Lloyd to do the same. The mass rerouting has lengthened transit times for goods from Asia to Europe, further causing capacity constraints out on the ocean and leading to congestion at the two largest ports in the world, Shanghai and Singapore.
“Today, all ships that can sail and all ships that were previously not well utilized in other parts of the world have been redeployed to try to plug holes,” Clerc said to customers during a recent online event. “It has alleviated part of the problem, but far from all the problem across the industry, including for Maersk. We are going to have in the coming month missing positions or ships that are sailing that are a significantly different size from what we normally would have on that string, which will also imply reduced ability for us to carry all the demand that there is.”
According to Clerc, the capacity constraints exist because it takes two to three ships to extend one voyage to travel the longer route around Africa, depending on the trade in question.
Clerc noted that the availability of additional capacity was already low to begin with, which has limited carriers’ ability to bring in extra tonnage.
Planning for demand peaks around Lunar New Year helped soften the impacts of the Red Sea situation in the first quarter, according to the CEO. But the challenges since April and May the challenges have intensified, he said.
Clerc also pointed to one of the more obvious impacts of the Red Sea crisis—the acceleration of ocean freight rates, which have continued their ascent since April after the post-Lunar New Year comedown.
Drewry’s World Container Index (WCI), which measures ocean spot freight rates across eight major trade lanes, increased 4 percent week over week to $5,318 per 40-foot container on Thursday. Since Nov. 30, these container prices have shot up nearly 285 percent. Some speculation from maritime trade advisory service Sea-Intelligence even indicated that freight rates can escalate to roughly $20,000 per container on Asia-to-Europe routes.
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“The longer that this lasts, the more our costs will get deeply ingrained,” Clerc told Maersk customers. “We don’t know yet exactly how much of these costs we will recover and for how long. The higher rates we are seeing right now are of a temporary nature. We will see eventually that they go back to market as some of these problems get alleviated either by the new tonnage being phased gradually in or by us resuming normal sailing routes in the near future.”
Maersk exits bidding war for DB Schenker
Maersk recently pulled out of the running to acquire another logistics giant, Germany-based DB Schenker , with Clerc saying in a statement that a review of the company identified areas where integration would be challenging.
The reported bid for the Deutsche Bahn subsidiary was reported to be more than 15 billion euros ($16.1 billion).
According to Bloomberg, three companies are now known to be in the race: one of DB Schenker’s largest rivals, the Denmark-headquartered logistics and transportation company DSV; MSC; and a consortium led by private equity firms CVC Capital and Carlyle Group.
A deal for DB Schenker would have fit in with Maersk’s expansion strategy in recent years, with the company seeking to extend its reach beyond its ocean carrier roots into areas like air freight, land-based transportation and freight forwarding via acquisitions .
“Our strategic focus remains unchanged; acquisitions continue to be an important lever to scale our logistics business,” Clerc said. “We are committed to continue to grow in Europe, including Germany, and we see our organic growth in logistics gaining momentum. We are executing our growth plans in the terminals business and implementing a new ocean network. This is where our focus is, and we are fully dedicated to further unfolding all the potential that we see.”
Deutsche Bahn announced that DB Schenker was officially up for sale in December 2023 after spending a year mulling its options.
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