Middle East affected by Red Sea diversions

Middle Eastern markets often the wayport business for Asia/Europe services is being bypassed as vessels on the reefer trades divert via the Cape of Good Hope.

Middle Eastern markets, traditionally serving as transit points for Asia-Europe routes, are increasingly being bypassed as reefer vessels divert via the Cape of Good Hope. Since this shift, Southeast Asian freight has experienced significant growth of 6.8%, while demand in the Middle East has slowed to just 2.5%.

The decline in seafood trade from the Arabian Gulf is reflected in the widening freight rate gap between services once considered comparable. At the start of the year, reefer rates to Middle Eastern and Southeast Asian markets differed by just $64 per FEU for high cube containers. However, by September 19, the gap had dramatically widened to $959 per FEU, according to Xeneta.

With the major trade routes softening, carriers are unlikely to divert any of the new vessels to this minor trade route. However, Xeneta’s chief analyst, Peter Sand mentioned that carriers may explore alternatives to bring in reefer cargo, such as transshipping at Jeddah or trucking cargo across Saudi Arabia from Jeddah. And added that trucking isn’t a substitute for shipping, but in the right circumstances, it could provide a way to deliver goods to market.

Although reefer trades from the Far East and India to the Middle East have increased, these products don’t directly compete with European fish, and it’s unlikely they will replace them. If the Suez Canal corridor reopens, European products could come back to the Middle East. However, Sand cautioned that carriers will need to deploy their tonnage more strategically unless freight rates recover within the next year—when a large number of new vessels are set to be delivered—but he did not elaborate on what that could entail.