Container prices and freight rates are influenced by a litany of costs and sensitive market conditions.
The South African Association of Ship Owners and Agents (Saasoa) has warned that rising shipping costs and longer journey times around the Cape of Good Hope would exacerbate rate hikes.
There was no reason to expect any financial relief in the short term.
Saasoa, which represents the maritime and shipping industry, said as ships spend more time at sea, more space was required which meant companies had to charter or buy vessels which required additional personnel.
Vessels were not readily available which caused freight rates to rise. Another side effect of longer routes was gas emissions as ships had increased speed leading to a rise in fumes.
Peter Besnard, Saasoa CEO, said the Red Sea route for global trade was ‘enormous’ but for six months to date vessels had been attacked by Houthi rebels, especially those with ties to Israel.
Besnard said a decision was taken to re-route and navigate vessels around the Cape of Good Hope, significantly increasing travel time, fuel consumption and bunkering costs.
“While shipowners have seemingly adapted to the situation considering the limitations on use of the Suez Canal with costs briefly dropping after skyrocketing in January 2024,” Besnard said.
“In addition, global travel is also being hampered by low water levels in the Panama canal meaning that the waterway cannot be fully utilised but is recovering giving some light at the end of the tunnel.”
Besnard said with the Red Sea saga set to continue indefinitely prolonging the crisis, shipping companies could be overwhelmed and significantly boost freight rates further as vessels cannot be built overnight and took many years to complete hence the crisis could worsen even further.
“On the home front, our South African ports are in a dismal state as age-old handling equipment breakdowns continue unabated delaying vessels at the anchorage for 10 to 12 days at a time, then in port a further two to three days because of equipment breakdowns, weather and wind resulting in work stoppages that ultimately follows the vessel at all ports of call coastwise,” he said.
Gavin Kelly, CEO of the Road Freight Association, said container prices were being driven by events in the world.
“Shipping lines are charging more, due to reduced capacity and raised risks, e.g. the Houthi attacks in the near east. These and other economic forces around the globe are driving up prices,” Kelly said.
The RFA said its members moved containers as they do not pay for the movement of the containers by shipping companies.
“They charge to move containers as required. There is pressure on the cost as passed on by shipping companies.”
Bongiwe Gune, an assistant lecturer for Transport and Logistics at the University of Zululand’s Richards Bay campus, said containers are used to distribute goods in a united form, using intermodal transport.
“Disruptions on port operations reduces the number of freight that a port can process for a specific duration which causes delays, additional transport costs when the goods are re-routed, and depreciation of the goods,” Gune said.
“Container prices are influenced by different variables such as the port charges, road transport costs and distinct geographical locations, global events, the increasing demand of containerised goods, the vessels turnaround times and the global events.”
Dr Sanele Gumede, who lectures Analysis of Sea Freight markets at the University of KwaZulu-Natal, said the international market presented a lot of turbulence.
“If the freight rates go up, that means what we buy in stores will go up. If it goes down you will not find many increases in what we buy,” Gumede said.
“Most of the time you will find that some firms will not increase prices as much as prices going up. This means the stores will make a loss taking less money.”
BUSINESS REPORT