Shipment costs from China will rise as merchant ships reroute around Africa as Middle East conflict escalates
Merchant ships are bypassing the Red Sea and taking a longer route around Africa, contributing to China's shortage of empty containers. As a result, the costs of importing goods from China and Russia are increasing, reports "Kommersant." The issue extends beyond maritime transport.
3:37 PM EDT, June 3, 2024
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 now taking a much longer route around Africa due to attacks by Yemeni Houthi fighters, who are shelling vessels to force Israel into agreeing to a ceasefire in the Gaza Strip. Consequently, these ships reach their destinations two or, in some cases, even more weeks later. This delay, combined with increased imports of goods from China to Europe and significantly reduced exports, caused a shortage of empty containers in China.
"Kommersant," the most significant independent Russian daily covering this issue, reports that since the beginning of 2024, spot freight rates have doubled, and in May alone, they increased by 50 percent. American media outlets like CNBC and chinadaily.com.cn have also raised concerns about this issue. Representatives of the stonemasonry industry, 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 primary solution would 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 this "dry" port after a long period of inactivity caused by the war in Ukraine.
According to data from Eurasian Rail Alliance, from January to April 2024, Małaszewicze received 110.69 percent more containers year over year—nearly 78,800. In the opposite direction, 1,966 containers were sent, representing an increase of 374.88 percent.
