Shipping costs will increase as the Red Sea conflict reshapes global shipping routes and costs
Merchant ships bypass the Red Sea and take a longer route around Africa, partly because China has started running out of empty containers. As a result, the costs of importing goods from China to Europe and Russia are increasing, reports "Kommersant." And it's not just about maritime transport.
The conflict in the Middle East has caused traffic on the Red Sea—a crucial and shortest maritime route connecting Europe and China—to almost completely freeze.
Ships are taking a much longer route around Africa due to attacks by Yemeni Houthi fighters who are shelling vessels to force Israel to agree to a ceasefire in the Gaza Strip.
As a result, they reach their destinations two or sometimes even more weeks later. This, combined with increased imports of goods from China to Europe and significantly reduced exports, causes a shortage of empty containers in China.
"Kommersant," the largest and independent Russian daily covering this issue, reports that spot freight rates have doubled since the beginning of 2024, and in May alone, they increased by 50 percent. Previously, American CNBC and chinadaily.com.cn also raised alarms about this issue. Representatives of stonemasonry, who import granite from India and China, highlighted the drastic increase in maritime transport costs.
Waiting for a breakthrough in the Middle East
Experts believe that costs will rise even more. The solution would primarily be a truce between Hamas and Israel. Over the weekend, there was hope for a ceasefire, but nothing is certain yet.
Meanwhile, as the Red Sea becomes "dead" for trade, the railway New Silk Road connecting China with the European Union is gaining importance again. One of the main EU gateways for the New Silk Road is the Polish transshipment port in Małaszewicze, near the border with Belarus. There has been increased activity in the "dry" port after a long silence caused by the war in Ukraine.
According to data from Eurasian Rail Alliance, from January to April 2024, Małaszewicze received 111 percent more containers year to year—nearly 78,800. In the opposite direction, 1,970 containers were sent, representing an increase of 375 percent.
