Rising Rates, Congestion, and a Capacity Squeeze

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Since the beginning of May, container shipping rates have surged by 28.8% due to Asian port congestion, high US import demand, reduced Asia-Europe capacity, and Red Sea geopolitical risks. Drewry Shipping reported a 2.6% week-on-week drop in rates from 25 January to early May, boosting container shipping companies' shares by 19% this year. Short-term factors like Asian congestion and European capacity constraints, caused by Red Sea diversions, are driving the rate increases. Alphaliner noted that despite 1.14 million TEUs of new capacity added this year, 36 ships were still needed for the Asia-Europe routes as of 10 May. If Red Sea diversions end and Suez Canal transits resume, 54 vessels (764,100 TEUs) could be redeployed, but overcapacity issues would remain. Alphaliner analyst Stefan Verberckmoes highlighted a 10% capacity shortage on the Asia-Europe trade, expecting an additional 2 million TEUs this year. A strong peak season is anticipated, requiring more capacity.

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