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Red Sea Chaos, Somali Pirates, Lead to Rising Container Rates

December 28, 2023

As 2023 draws to a close, we reflect on a year marked by significant upheavals in the maritime and transportation sectors. This edition zeroes in on the Red Sea's ongoing turmoil, profoundly impacting global shipping routes and rates. As major companies reroute to avoid the Red Sea, we witness a consequential shift in maritime logistics, presenting both challenges and opportunities.

We also highlight BP's strategic pause in the Red Sea transits due to escalating security concerns, a move reflecting the industry's responsiveness to geopolitical shifts. Additionally, we cover the monumental merger between Eagle Bulk Shipping and Star Bulk Carriers, reshaping the dry bulk shipping landscape.

With the Panama Canal's declining transits and the resurgence of Somali piracy, our newsletter provides critical insights into these complex issues. Stay informed with us as we navigate the ever-evolving world of maritime logistics and transportation.

Red Sea Chaos Could Boost Tanker and Container Shipping Rates

Recent disruptions in the Red Sea have sent shockwaves through the shipping industry. As chaos unfolds, there are indications that tanker and container shipping rates could be impacted. The number of shipping companies refusing to risk Red Sea transits is growing by the day. The waters off the Cape of Good Hope are about to get much busier as more ships circumvent Africa on a detour around the Red Sea and Suez Canal.

According to this report on FreightWaves, companies confirmed or reported to be pausing Red Sea transits and/or rerouting around the Cape of Good Hope included container lines Maersk, MSC, Hapag-Lloyd, CMA CGM, Zim, Evergreen, Yang Ming, Cosco, OOCL, HMM and ONE; tanker owners Frontline and Euronav; car carrier owner Wallenius Wilhelmsen; and oil and gas company Equinor. Explore the implications and potential challenges arising from these developments.

BP Joins Growing Number of Companies in Stopping Red Sea Transits

Oil giant BP joined the growing list of shipping companies suspending their operations passing through the Red Sea and Suez Canal as the security situation was increasingly being questioned. The price of oil reversed a multi-day decline, jumping 1-2% on world markets after BP reported implementing a “precautionary pause” for all of its vessels sailing through the Red Sea and Suez Canal due to the “deteriorating security situation” in the region.

By midday, the price of oil was up as much as three percent on the NYMEX exchange and had briefly been back about $74 a barrel after retreating from a high of over $90 a barrel in late October and falling below $69 last week. Delve into the reasons behind this decision and its broader implications for Maritime Logistics.

Star Bulk and Eagle Bulk Shipping Agree to $2.1B Merger

Eagle Bulk Shipping and Star Bulk Carriers have agreed to merge in an all-stock deal that would create the world’s fourth-largest commodities transporter, making the new organization more attractive to large investors. According to The Wall Street Journal, the deal, set to close in 2024, would create a company valued at roughly $2.1 billion. Star Bulk Carriers shareholders will own 71% of the company, while Eagle Bulk shareholders will own 29%.

The merger was backed by the asset management company Oaktree Capital Management, which owned a roughly 25% share of both companies until September 2023. Following the announcement, Oaktree cut its stake in Star Bulk from 25% to about 7% and sold its 28% stake in Eagle Bulk. Uncover the details of this strategic move and its potential impact on the dry bulk shipping sector in this Supply Chain Brain report.

Panama Canal Transits Plunge as Larger Ships Are Turned Away

The official Panama Canal transit numbers declined 22% in November versus October, according to just-released data from the Panama Canal Authority (ACP). And for the first time since the drought began, the numbers are not just falling at the older, smaller Panamax locks. They’re also declining sharply at the larger Neopanamax locks, which debuted in 2016. Transits through the Neopanamax locks fell 28% in November versus October, while transits through the Panamax locks dropped by 19%.

Container ships, LPG ships, and LNG ships were hard hit on the Neopanamax side. At the Panamax locks, dry bulk shipping was the biggest decliner by far. These transits have gone off a cliff as grain-laden bulkers have shifted to the Suez Canal: 164 Panamax bulkers transited in October and just 87 in November — a 47% month-on-month collapse. Understand the factors contributing to this trend and the implications for global trade routes in this article.

Somali Pirates Are Back, but a Full-Scale Return Is Unlikely

An Iranian fishing vessel, Almeraj 1, was reportedly hijacked by Somali pirates in November 2023. According to media reports, the pirates demanded US$400,000 in ransom and threatened to use the Iranian ship for additional hijackings if the payment was not made. Two days later, other Somali pirates hijacked a tanker, Central Park, off the Yemeni coast.

The two attacks have led the Somali government to call for greater international support to deter a resurgence of piracy in the Horn of Africa. Similar fears that Somali piracy was on the rebound surfaced after five previous attacks in 2017, 2018, 2019, and 2020. Gain perspective on the current threat level and the measures being taken to address this maritime challenge.

Navigating Tomorrow's Transportation Challenges with Real Time Container Tracking

In the dynamic landscape of transportation, staying informed is crucial. OpenTrack remains your reliable ally, offering:

  • Real-time Container Tracking: Ensure visibility at every stage of your container's journey.
  • Predictive Analytics: Anticipate disruptions and proactively adjust your logistics strategies.
  • Dynamic Route Optimization: Optimize shipping routes based on the latest trends and developments.

Ready to revolutionize your logistics operations? Book a demo with OpenTrack today and discover how our solutions can elevate your shipping and tracking capabilities. Stay ahead in the fast-paced world of transportation!

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