Red Sea Crisis: Who are the Winners and Losers as Shipping Prices Rise?

First-half earnings in Asia revealed that the ongoing impact of the Red Sea crisis will continue to be a costly burden for companies that manufacture goods for export, while companies that transport these goods benefit from higher freight rates as the crisis deepens.

Shipping companies, wary of attacks in the Red Sea, have cut their traffic in the narrow waterway by 70% since mid-July compared with December, increasing transit times and freight rates, according to Bloomberg Intelligence.

Chinese shipping companies such as COSCO Shipping Holdings saw their profits rise thanks to increased revenues in the container shipping segment, while Orient Overseas International reported that its trans-Pacific trade route performed better as supply chain constraints pushed up freight rates.

In contrast, other companies such as Miniso Group Holdings have been squeezed by rising logistics costs. Xiaomi’s main supplier, Dixon Technologies India, has reported a hit to its margins due to higher shipping costs, while motorcycle maker TVS Motor said its exports were impacted by longer transit times.

The suffering of the shipping sector

“The container shipping industry and its associated supply chain are suffering again, this time due to the prolonged crisis in the Red Sea,” said Lee Glasko and Kenneth Low, analysts at Bloomberg Intelligence. “The short-term result has been higher container rates and higher profits for shipping companies.”

Cathay Pacific Airways, for its part, reported that it carried 10% more cargo between January and June, and the company, along with HSBC analysts, expects demand to remain strong until the end of the year.

Søren Toft, chief executive of MSC Mediterranean Shipping, does not expect an end to the Red Sea crisis anytime soon. “I don’t think there will be a short-term solution in sight” to ensure safe passage through the region, the head of the world’s largest container shipping company told Bloomberg News earlier this week.

Source: Bloomberg