Ocean shipping rates have been on a steady decline since mid-January. That can be explained, at least in part, by the end to Houthi attacks on Red Sea shipping. However, with the Yemeni rebels now threatening to resume the attacks, a reversal of that trend may begin. Rail freight companies could benefit, but not all.
Ocean shipping rates have reached their lowest point since December 2023, according to the WCI Drewry index. Shipping a 40-foot container costs about 2500 dollars as of 12 March. Compare that to 9 January, when the price was nearly 4000 dollars. The cessation of Red Sea attacks therefore coincides with a near 40 per cent drop in ocean shipping rates.
However, the tide may be turning at sea. Israel’s new blockade of food, medicine, electricity supply and other aid to Gaza prompted the Houthis to threaten a resumption of the attacks. That could mean more risk, longer routes and less capacity for maritime shipping. As a result, prices will likely grow once more.
What does it mean for rail?
From a business perspective, that could be good news for rail freight and maritime shipping alike. As for rail freight, higher (and volatile) prices at sea could improve the sector’s competitiveness. Shippers and freight forwarders have an incentive to consider rail once it improves its pricing relative to the sea, especially in the case of China – Europe traffic.
At the same time, the maritime world is also cautiously signalling optimism about higher rates. For example, the WCI Drewry index writes that its equity index dropped by eight per cent year-to-date as of 12 February, reflecting investor caution over an earlier-than-expected rate decline with Red Sea disruptions easing. By contrast, its index rose by 17,6 per cent in 2024.
It’s not all smooth sailing
However, it must also be noted that the Red Sea “ceasefire” has likely not been entirely responsible for the change in ocean shipping rates. In November 2024, RailFreight.com reported that a decline was already much expected, and that that would be bad news for the China – Europe rail sector. A vessel ordering frenzy has led to overcapacity in the maritime sector, which market experts expected to suppress shipping rates. At the same time, shipping companies have reportedly also been cautious in their return to the Red Sea, so it seems improbable that prices will go back up to early January levels.
There is another side note to make for rail freight, however. Whereas China – Europe traffic could gain from higher shipping rates, others may not be too happy about it. For example, Baltic Rail told RailFreight.com in January that the Red Sea attacks hurt its business. The company focuses on freight coming from East Asia into Europe via the Red Sea and Adriatic ports. Companies that are similarly dependent on freight coming into Mediterranean ports through the Suez Canal may therefore not be too enthusiastic about a renewal of the attacks.