Middle East reefers hit by Red Sea diversions

By heading southwest after passing Sumatra and taking the reverse trajectory from Europe the smaller, but lucrative trade in seafood from Europe to the Arabian Gulf has entered into a “negative spiral”, according to Xeneta analysis.

A Xeneta analysis has compared the reefer trades from Europe to the Arabian Gulf and Southeast Asia, emphasising the impact of the effective blockade of the Suez route in freight rates on the two trades.

Some 90% of container shipping has diverted around the African Cape due to the conflict in the Middle East, with carriers wanting to return empty equipment and ships to the Far East as quickly as possible the ships have bypassed markets that were traditionally called at along the route, picking up and delivering cargo in both directions.

In the period since the cape diversions have been in place there has been a significant growth in Southeast Asian freight of 6.8% with demand growth in the Middle East slowing to just 2.5%.

A decline in the Arabian Gulf seafood trade is highlighted by the divergence in freight rates seen on what were considered to be similar services.

On 1 January this year reefer rates to Middle Eastern and Southeast Asian markets were just $64 per feu apart, for a high cube box: “By 19 September, the spread between these trades had increased to an eyebrow-raising $959 per feu high cube,” said Xeneta.

Related:Red Sea crisis hits volumes at port of Piraeus

According to Xeneta data rates to the Persian Gulf and the Gulf of Oman surged by around $1,000 per feu in January this year, from $2,225 per feu and have now settled at $3,500 per feu. A similar surge in Southeast Asian reefer rates was also seen, but Xeneta chief analyst Peter Sand pointed out this had now settled at around $2,500 per feu, an increase of about $1,000 per box on late 2023 prices.

Sand, however, pointed out that, although the Arabian Gulf reefer market is profitable, it is not a significant market in terms of volumes, with just 18,000 teu shipped last year, up from 13,000 teu, “It’s not a massive change,” he said.

Although lines could well be looking for areas in which to make a profit, as the major trades soften it is unlikely that any of the glut of newbuildings will be diverted to such a minor trade.

“Carriers will be looking for different ways to bring in reefer cargo such as transhipping freight at Jeddah or trucking cargo from Jeddah across the Saudi Arabian desert could be another option,” said Sand.

He added: “Trucking is not a substitute for shipping, but if you connect the dots to a broken supply chain and the price is right it could be a route to get freight to market.”

Related:Red Sea crisis tops reader concerns

There has been some increase in reefer trades from the Far East and India to Middle Eastern markets, according to Sand, but he said these are not competing products and it is not expected that these products will replace European fish.

If that proves to be the case, then European products could return to the Middle East as soon as the Suez Canal corridor re-opens.

However, Sand believes that unless there is a turnaround in freight rates within the next year, during which there is a huge number of new vessels expected to be delivered, there is a probability that “carriers will deploy tonnage in a smarter way,” without detailing what that might mean.