Tremors from the Red Sea conflict begin to shake Canada, with dozens of ships delayed

Christopher Reynolds, The Canadian Press

Posted on Monday, January 15, 2024 6:26 pm EST

Last updated Monday, January 15, 2024 6:28 pm EST

Canadian shippers are starting to feel the pressure from recent attacks on cargo ships in the Red Sea, as container rates rise and ships arrive late to the East Coast.

Data from the port of Halifax shows that 57 of the 87 ships (nearly two-thirds) scheduled to dock at the port over the next four weeks are now expected to arrive at the terminal at least a day late, and some of them with more than two days late. weeks late.

According to industry research firm Drewry, the average price of shipping containers has doubled since mid-December, when Houthi militants in Yemen stepped up attacks on commercial ships to protest Israel’s military campaign in the Gaza Strip.

On Friday, the United States led airstrikes against Houthi rebels in a response that included planning support from the Canadian Armed Forces. Houthi fighters fired a missile that hit a U.S.-owned ship on Monday, less than a day after the same group fired an anti-ship cruise missile at a U.S. destroyer in the Red Sea.

The growing conflict has led major container shippers to stay away from the route through the Suez Canal, opting instead for a route around Africa’s Cape of Good Hope, which can add a week or two to shipping costs. transit times and higher fuel, crew and insurance costs. .

“The global shipping industry is being affected by the situation in the Red Sea, and we are starting to see some delays as shipping lines employ alternative routes around Africa,” said Paul MacIsaac, senior vice president of the Port. of Halifax, in a statement. The maritime gateway is eastern Canada’s second-largest port and handles everything from exported frozen vegetables to clothing imports from Southeast Asia.

Canadian Shipping Federation CEO Chris Hall says the delays have left importers in a bind, with stocks stuck on the way to Canadian shores and platforms.

“The number of ships that have been diverted was staggering”: more than 350, according to shipping giant Kuehne+Nagel. “That change adds time and cost to the final products,” said Hall, whose organization represents companies such as Canadian Tire Corp. Home Depot Canada and Hudson’s Bay Co.

“Someone has to pick that up.”

But experts cautioned against overstating the impact, as schedules at the Port of Montreal and the West Coast have been largely unaffected so far.

“As the Red Sea/Suez Canal is a trade route largely serving Europe and the east coast of North America, the current situation is not expected to impact trans-Pacific transit lengths,” said spokesperson Alex Munro. from the Vancouver Fraser Port Authority. .

Potential ripple effects may still occur, including in shipping price, or already have.

Freight rates from East Asia to the West Coast of the United States increased 56 percent month over month through Thursday, according to transportation analytics firm Xeneta.

But excess capacity in the sector means shippers can accommodate longer shipping times and rates will likely stabilize well below pandemic highs, according to the Global Shippers Forum, which represents cargo owners.

“There is no chronic shortage of shipping capacity like there was during the COVID pandemic, and substantial new capacity is expected to be delivered during the first half of 2024,” the organization said in an update to members on Friday.

The longer routes mean ports will need to make a “one-off” change to schedules over the next few weeks, but service patterns should become predictable again afterwards, he said.

Carriers facing contract renewals amid rising costs may include provisions to pay less once spot rates decline again, the group said.

Meanwhile, demand for onboard cargo space remains stable or declining slightly, according to experts.

“There was high inflation, there was a COVID hangover and people were spending all their CERB money on big-screen TVs – they didn’t need another one,” said John Corey, director of the Canadian Transportation Management Association. Container traffic through the West Coast fell about nine percent last year, he said.

However, a drought in Central America has further amplified the impact of the Red Sea prohibited zone.

The drought has sapped water from the Panama Canal, which is used to raise and lower ships in a dozen locks, prompting officials to reduce the number of ships they let through the waterway.

The smaller number of slots has raised tolls and caused bottlenecks in the critical trade conduit between the Atlantic and Pacific oceans and forced some oil tankers and container ships to stay away by taking longer and more expensive routes, usually through the Channel. Suez, where it transports approximately a third of the world’s transport. container traffic.

Now, the Red Sea crisis is driving up those shipping costs. Since mid-December, rates have risen 153 percent for freight shipping from East Asia to Northern Europe, according to Xeneta.

“I would call it an aggravating effect,” said Bob Ballantyne, an adviser to the Canadian Shipping Federation.

Delays in product arrivals aside, problems in the two channels may not be immediate for Canadians.

“I think it’s going to take longer for that to hit Canada,” said the federation’s John Corey.

“But so it will be; so it will be.”

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