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The Red Sea crisis has brought additional shipping charges to some Philippine shippers but its effects have yet to be fully felt by the general trading community
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An executive of an international freight forwarding company said their company is now charging an extra $1,000 for every 20-footer they handle for shipments to and from Europe
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The additional charge is on top of shipping line surcharges
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Philippine Economic Zone Authority director general Tereso Panga said his agency is “pro-actively working together with other concerned agencies to de-risk global supply chains”
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Philippine Exporters Confederation and United Portusers Confederation members have yet to feel effects of the Red Sea crisis
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UPC president though says higher freight charges are inevitable due to shipping line surcharges
The Red Sea crisis has brought additional shipping charges for some Philippine shippers but its effects have yet to be fully felt by the general trading community.
A Philippine-based executive of an international freight forwarding company said their company is now charging an extra $1,000 for every 20-footer they handle for shipments to and from Europe.
The additional charge is on top of shipping line surcharges, she said.
Since late last year, Houthi militant rebels have attacked commercial vessels plying the Red Sea with the goal of ending Israel’s offensive in the Gaza Strip triggered by the October 7 attack in southern Israel of Palestinian militant group Hamas.
READ: Red Sea security disrupts global cargo, expected rate hikes and transit impacts
The attacks have led to the re-routing of vessels to the Cape of Good Hope in South Africa, with some international shipping lines sending out surcharge notices and advising shippers to expect delays.
The Philippine-based forwarding executive, who requested anonymity, said since freight forwarders are not vessel owners, they have no control over shipment delays caused by vessel diversion; they can only try to manage expectations of their clients.
She said they are informing clients to expect delays as diversion means an additional 14 days of shipping, depending on destination.
Sea Intelligence, which provides research and data on the container shipping industry, on January 11 said while the “the current capacity outlook is fraught with a high degree of uncertainty… the present data shows that the shippers could expect a capacity crunch for Asian exports in the coming weeks.”
It said that the impact is quite visible on Asia-North Europe due to a combination of some services being held back in departure from Asia in the short-term awaiting re-routing, and some services clearly arriving late into Asia, causing a rapid shortfall in the middle weeks of January, with a steep capacity drop now expected for the week of January 22.
Sea Intelligence said the cost in terms of higher freight rates is between US$4 million and $72 million per day for the Asia-Europe cargo alone. It added that the impact on Asia-Europe capacity from the Red Sea crisis is only surpassed by the Ever Given’s blockage of the Suez Canal in 2021, which was even larger.
Pro-active collaboration
Philippine Economic Zone Authority (PEZA) director general Tereso Panga said they have “yet to feel the effects in the Philippines but are pro-actively working together with other concerned agencies to de-risk global supply chains that may affect our locators in particular and the whole economy in general.”
Panga noted the rerouting of vessels from the Red Sea “will make shipping costs 15% more expensive and add 10 days for the exchange of goods between Europe and Asia.”
The PEZA chief said this will “definitely affect global trade, delaying production and deliveries of products and resources thereby increasing the cost of goods” and effectively result in higher inflation in different parts of the world.
“At PEZA we are already preparing for this by collaborating with the affected RBEs (registered business enterprises) sourcing/importing and exporting to and from the EU and the Mediterranean to ensure that the least possible effects would be felt as contingencies are set in place in advance of any major conflict,” Panga added.
Philippine Exporters Confederation, Inc. vice president for advocacy, communications, and special concerns Ma. Flordeliza Leong said member-exporters have also yet to feel the effects of the Red Sea crisis although this may be because the attacks came after the Christmas season when trade activities are usually slower.
“Hoping that this will be resolved soon to avoid supply chain disruption especially as trade peaks,” Leong told PortCalls.
United Portusers Confederation of the Philippines (UPC) president Nelson Mendoza said so far there are no complaints of shipment delays from its member associations, but this could be due to the current low volume of US and Europe shipments.
He told PortCalls their association is, however, aware the situation will eventually bring additional costs due to shipping line surcharges.
Danish shipping giant Maersk in an advisory on January 12 said all its vessels due to transit the Red Sea/Gulf of Aden will be diverted for the foreseeable future south around the Cape of Good Hope.
The previously announced surcharges for all cargo on vessels affected by the disruptions will also remain in effect, it said. These include transit disruption surcharge and emergency contingency surcharge.
Hapag-Lloyd has also diverted its vessels from the Red Sea to around the Cape of Good Hope. Since January 1, Hapag-Lloyd has been imposing a peak season surcharge from Asia & Oceania to Red Sea (Sokhna, Egypt; Jordan, Saudi Arabia [Western Province], and Yemen).
UPC corporate secretary and Philippine Multimodal Transport and Logistics Association, Inc. honorary chair Marilyn Alberto told PortCalls the transit times for vessels rerouting around the Cape of Good Hope are longer by two to five weeks (round trip), depending on the ship’s final destination.
As it is, Alberto noted sailings from Asia to the Americas are already impacted by vessel diversions from Panama Canal, currently highly congested due to vessel transit limitations resulting from low water levels induced by drought.
With the addition of the Red Sea crisis, which affects Suez Canal transits, Asia to US East Coast shippers have already started to re-route their shipments to the US West Coast, Alberto said. This is translating to a high volume of bookings for the US West Coast as shippers continue to mitigate the impact of the disruptions on their supply chains.
Quantifying costs
In a statement on January 18, Sea Intelligence chief executive officer Sean Murphy said: “The Red Sea crisis has been going on for a month now, and the current service networks are clearly in flux, with a lot of uncertainty especially on the services going from Asia to Europe.”
Based on its Trade Capacity Outlook report, Sea Intelligence noted that with the Ever Given blockage of the Suez Canal in 2021 as the exception, the Red Sea crisis “is the largest single event – even larger than the early pandemic impact”, that has caused a capacity decline.
From a shipper perspective, Sea Analytica said the transit times will clearly increase with the round of Africa routing: more than a week longer from Asia to North Europe, and up to two weeks longer into the Mediterranean. The disruptions, while serious, are far from the ones caused during the coronavirus pandemic. – Roumina Pablo
