I’ve had a couple posts already in the past week about the cargo situation in the Red Sea. The latest was on Monday and included news of the US gathering in the area with allies to possibly take a shot at these Houthis.

CHART OF THE DAY: Currently, 5 out of 4 largest container shipping companies are turning away their vessels from the Red Sea due to attacks from the Houthis from Yemen, accounting for >50% of the world's capacity (measured by TEU containers). https://t.co/TiwfUc4KSY pic.twitter.com/O9iaphSOm1

— Javier Blas (@JavierBlas) December 18, 2023

Couldn’t happen a minute too soon for the global economy. The stress is already impacting the shipping industry.

Aside note about who should be do 'something' about Houthis of Yemen. Look at the nationality of the container shipping companies that have stopped using the Red Sea:

MSC 🇨🇭🇮🇹
Maersk 🇩🇰
CMA CGM 🇫🇷
Hapag-Lloyd 🇩🇪

That's a lot of European flags…

— Javier Blas (@JavierBlas) December 18, 2023

Might as well be COVID shipping 2.0 at this…rate. Pardon the pun, but OUCH. These really do sound like the numbers Bingley was telling me they were getting soaked for shipments just two years ago.

STATE OF FREIGHT
Container rates hit $10,000 as ocean freight inflation soars in Red Sea crisis

With the Red Sea diversions by shipping companies including Maersk continuing amid the risk of attacks by the Houthis, global logistics managers are faced with a two-front storm of rising ocean and air freight prices and stranded cargo. Both are threats to the global supply chain after three tumultuous years of inflationary pressures and delays from Covid disruptions which recently seemed to finally have been vanquished.

The ceiling in ocean freight prices shot up in a matter of hours on Thursday as a result of more vessels diverting from the Red Sea. CNBC has learned that logistics managers were quoted this morning an ocean freight rate of $10,000 per 40-foot container from Shanghai to the U.K. Last week, rates were $1,900 for a 20-foot container, to $2,400 for a 40-foot container. Truck rates in the Middle East now being quoted are more than double.

Alan Baer, CEO of OL USA tells CNBC while pricing is undergoing rapid adjustments as ocean carriers work to recover the added costs of diverting their vessels, these massive jumps in rates need to be clarified as the shipping community of importers and exporters, along with government regulators seek to better understand the overall drivers of these large increases.

“During Covid, we had a slower build-up in freight prices due to the impact the pandemic had on the global supply chain,” Baer said. “What we are experiencing here is a light switch event where vessels are being redirected in real time. But, that said, in certain trade lanes you are seeing freight rates going up between 100 to 300 percent. This does not appear to be totally driven by changes in supply and demand.”

It sure doesn’t help the international shipping community that they have zero clue what’s going on as far as the supposed protection the US and others are offering, or what’s in the offing as far as either retaliation or that same protection. That uncertainty is going to drive rates up, too.

Shipping companies remain in the dark over a new international navy coalition being assembled by the United States to combat attacks in the Red Sea, with many vessels continuing to avoid the area or canceling contracts, sources said on Wednesday.

The sources, who include shipping and maritime security officials, say few practical details are known about the initiative launched on Tuesday by Washington or whether it will directly engage in the event of further armed attacks at sea.

…“Will they do anything except swat the missiles out of the sky? If that’s all, then will it give the assurances that are needed for shipping companies? We don’t know yet,” said one shipping industry source.

“The market needs to see it have some success or concrete action,” another source said.

The International Chamber of Shipping said it expected the new task force to enable a “co-ordinated effort across a large number of military warships that will provide a significant suppressive response.”

Then again, what’s an international company to do when there are signs that that very same fragile, ad hoc coalition is already coming apart at the seams?

US coalition is falling apart with rumors France is leaving to go protect 🇫🇷ships while DoD has virtually abandoned 🇺🇸ships idle right NOW within Houthi missile range

I'm also deeply troubled by the sea of US Naval officers & experts here who push back hard on my concerns. pic.twitter.com/qC34UCCSpD

— John Ʌ Konrad V (@johnkonrad) December 21, 2023

Even rumors are enough to spook the industry in such a situation, when there are tens of millions involved on every boat, less mind the boat itself. Other people are seeing what Captain Konrad is.

So what in the wide world of sports is going on?

The Houtis have effectively blockaded Israel.

BREAKING: Chief of Israel's Eilat port says business at the docks is down around 85% since Yemen’s Houthis began attacking Red Sea maritime traffic

— The Spectator Index (@spectatorindex) December 21, 2023

And they’ve also pretty effectively jacked another lovely inflationary pressure on the world’s economy.

Mediterranean shipping rates are up approx +40% in one week, in case anyone is paying attention. If stay high, you’re going to see shippers blow Q4 earnings estimates out of water. Follow this free site for weekly updates (bookmark it):https://t.co/K7RwAMqjfT pic.twitter.com/zfEJmVE8VF

— JaguarAnalytics (@JaguarAnalytics) December 21, 2023

IKEA is one of the manufacturers warning of delays due to the rerouted cargo ships. At least it makes for a light-hearted meme, even though it has to be making the retailer and customers waiting on their closets and beds sick to their stomachs.

When you enter @IKEA, cross through the red sea, and end up wandering through the store for the next 40 years. pic.twitter.com/OfBZ5gQmjA

— Liron Kopinsky 🎗️ ופדויי ה׳ ישובון ובאו ציון ברנה (@ldkop) December 21, 2023

So it rests on the Biden administration and the DoD at the moment. What do they do?

“We see the outcomes as fairly binary. Either creation of the task force substantially restores confidence in shippers using the Red Sea/Suez route, or further escalation largely closes the route.” Click pic for story link:#shipping #tankers #containers https://t.co/Rc8mAjWeJg

— Greg Miller (@GMJournalist) December 21, 2023

Can Biden, Austin, and Co. “restore confidence” in a Red Sea transit? If they feel they can, they’d better get moving.

All in favor of “By Joe, he can do it!” say “Aye!”

…*looks around*…

Awful quiet in here.