The data for the first two weeks of January is in, and it’s stark. Clarksons, Xeneta, and the Suez Canal Authority’s own transit statistics all agree: container shipping through the Red Sea has collapsed. Best case estimates put current Suez container throughput at around 10% of normal. Worst case has it under 8%. Nine out of every ten boxes that would have moved between Asia and Europe via Bab el-Mandeb in January 2023 are now sailing the extra 3,300 nautical miles around the Cape of Good Hope.
If you’re importing industrial chemicals into Sydney, Melbourne, Brisbane, Houston, or anywhere else downstream of a China origin, you are already feeling this in your freight invoices. The Drewry World Container Index composite has jumped from US$1,521 per FEU in late November to US$3,777 on 11 January, a 148% increase in seven weeks. The Shanghai to Rotterdam leg alone is up roughly 250% over the same period.
This post walks through what’s actually happening, what it’s costing, and what mid-size chemical importers need to do this month to protect Q1 and Q2.
The Numbers That Matter This Week
Here are the reference points we’re using to benchmark client shipments coming into Sydney and onward distribution across the Pacific:
| Indicator | Pre-crisis baseline (Nov 2023) | Current (mid-Jan 2024) | Change |
|---|---|---|---|
| Drewry WCI composite | US$1,521 / FEU | US$3,777 / FEU | +148% |
| Shanghai to Rotterdam | US$1,455 | US$4,984 | +243% |
| Shanghai to Genoa | US$1,956 | US$5,700 | +191% |
| Shanghai to New York | US$2,497 | US$3,900 | +56% |
| Shanghai to Los Angeles | US$2,100 | US$2,790 | +33% |
| Suez container transits (7-day avg) | 360 per week | 34 per week | minus 91% |
| Cape of Good Hope container transits | 85 per week | 520 per week | +511% |
| Average Asia to Europe transit time | 26 days | 40 days | +14 days |
| Average Asia to US East Coast transit | 32 days | 48 days | +16 days |
| Lloyd’s JWC war-risk premium (Class 3, Red Sea) | 0.07% of cargo value | 0.7% to 1.0% | up roughly 10x |
The US East Coast lane matters to Australian chemical importers even when the cargo isn’t going to Savannah or Charleston directly, because transhipment networks through Southeast Asia and the Middle East feed both US and Australian feeder services. When the mainline Asia to Europe and Asia to US East Coast services get disrupted, vessel positioning across the global network is thrown out for weeks.
Why the Cape Routing Is Structurally More Expensive
You might think a longer route means proportionally more fuel and proportionally more crew days and the rate increases should reflect that arithmetic. The reality is messier and you should understand why.
A typical 14,000 TEU mainline vessel burns around 150 to 180 tonnes of very low sulphur fuel oil per day at commercial speed. Adding 10 to 14 days at sea means an extra 1,500 to 2,500 tonnes of bunker fuel per voyage. At roughly US$650 per tonne for VLSFO at Singapore, that’s US$1 million to US$1.6 million of additional fuel per round trip. Spread across maybe 12,000 paid containers on that vessel, you’d expect around US$85 to US$135 per FEU of pure fuel cost addition.
But the freight rate has gone up by US$1,500 to US$3,500 per FEU, not US$135. The difference is not gouging. It’s capacity.
When every major alliance reroutes via the Cape simultaneously, total effective capacity on the Asia to Europe trade drops by roughly 20% because ships spend longer at sea per round trip. Fewer round trips per year means fewer slots offered per week. Fewer slots offered into unchanged demand means rates rise until they clear the market. Classic supply-side shock.
Carriers are also paying for faster steaming to try to catch up schedules, repositioning empty containers out of Europe and back to Asia faster to protect Chinese New Year pre-build demand, and paying higher port call fees in emergency bunker stops like Durban, Cape Town, and Las Palmas. None of that was in the Q4 2023 rate structure.
For chemical importers, this also has a service-reliability implication. Schedule reliability on Asia to Europe services is currently running under 50% on-time-arrival according to Sea-Intelligence’s preliminary January data. Pre-crisis it was just above 60%. Plan your inventory buffers accordingly.
War-Risk Insurance, What You’re Actually Paying Now
Lloyd’s Joint War Committee has the southern Red Sea, Gulf of Aden, and parts of the Indian Ocean listed as Hull War, Piracy, Terrorism and Related Perils zones. What that listing does, in practical terms, is require a 7-day notice and additional premium for any vessel transiting those waters. Carriers pay the hull premium. Cargo owners pay the cargo premium.
For Class 3 flammable liquids, Class 6.1 toxics, and Class 8 corrosives, we’ve seen quoted war-risk premiums in the last fortnight range from 0.5% up to 1.0% of cargo value per voyage for Red Sea transits. That’s 10 to 20 times the pre-crisis norm.
If you stay with Cape routing you avoid most of that load. That’s why almost every non-Iranian, non-Russian carrier has pulled out of the Red Sea entirely for January. It’s not just vessel safety. It’s that the war-risk and hull insurance surcharges pass the economic threshold where the Cape routing becomes cheaper than fighting through Bab el-Mandeb.
For your cargo policy, the two things to get written confirmation on this week are:
First, that your policy expressly allows Cape of Good Hope routing without penalty premium or deductible adjustment. Some older All Risks policies reference Suez passage in their trade-lane definition and need a specific endorsement.
Second, that if your carrier decides to attempt a Red Sea transit with naval escort cover later in the quarter, you have either pre-agreed war-risk cover at a known rate, or a clause that requires you to be notified and to approve the deviation in advance.
Transit Time Reality Check Across Five Major Lanes
For planning purposes, here are the transit ranges we’re quoting clients this week. Take the high end of the range and add 2 days of port congestion allowance at both origin and destination.
| Origin to destination | Pre-crisis port-to-port | Current port-to-port | Build inventory buffer |
|---|---|---|---|
| Shanghai to Rotterdam | 26 to 28 days | 38 to 42 days | +14 days |
| Ningbo to Antwerp | 28 to 30 days | 40 to 44 days | +14 days |
| Qingdao to Felixstowe | 30 to 32 days | 42 to 46 days | +14 days |
| Shanghai to New York (via Cape) | 32 to 35 days | 46 to 52 days | +16 days |
| Shanghai to Houston (via Panama plus Cape feeder) | 34 to 37 days | 48 to 54 days | +16 days |
| Shanghai to Sydney (largely unaffected) | 18 to 22 days | 20 to 24 days | +2 days |
The Sydney line is the exception. Asia to Oceania services don’t route via Suez, so direct-call services into Port Botany, Brisbane, and Melbourne are largely operating on schedule. That said, equipment shortages, especially reefer containers and 40-foot high-cubes, are starting to emerge in Chinese origin ports as carriers reposition boxes toward Europe-bound sailings. If you need specialty container types, book earlier than normal.
Chinese New Year 2024 Is About to Compound Everything
The 2024 Lunar New Year falls on 10 February. Factories in the major chemical-producing provinces, Jiangsu, Zhejiang, Shandong, and Guangdong, typically shut down between 7 February and 17 February, with staggered ramp-up through to early March. Logistics providers across China slow down from roughly 3 February.
You now have a genuine dual disruption risk: Red Sea rerouting already in force, and a two-week production and logistics pause stacked right on top. We’ll cover the CNY compound effect in detail in a dedicated post next month, but the planning headline is this: any cargo you want loading out of China before the holiday needs its bill of lading cut by 2 February. Any cargo that doesn’t load by then is unlikely to arrive into European ports before late March, or US East Coast ports before early April.
The Landed Cost Impact For A Typical Australian Chemical Importer
Let’s run the maths for a Sydney-based importer bringing in 150 FEU a year from Chinese ports, weighted about 60% to Shanghai and 40% to Ningbo. Average FOB value per FEU around US$75,000 for a mix of Class 3 solvents, Class 8 corrosives, and Class 9 polymer additives.
Pre-crisis annual freight spend: roughly 150 FEU at US$2,300 per FEU equals US$345,000.
Current freight spend at mid-January 2024 rates: 150 FEU at an Australia-weighted rate of roughly US$3,100 per FEU equals US$465,000. Add CAS and transit-disruption surcharges of US$500 per FEU across the book, that’s another US$75,000.
Insurance impact: Cape routing itself doesn’t attract a war-risk surcharge, so the direct hit is limited. However, some underwriters have raised base rates across all IMDG cargo by 0.02% to 0.05% of cargo value citing elevated market-wide risk. On an annual cargo value of US$11.25 million that’s US$2,250 to US$5,625 of additional premium.
Working capital impact: an average 14 extra days in transit on 150 FEU worth of US$75,000 cargo, financed at 9% cost of capital, adds roughly US$38,800 to annual carry cost.
Total annualised impact on a 150 FEU Australian chemical importer: roughly US$235,000, or roughly 2.1% of total annual cargo value. Most chemical distribution businesses run on 8% to 12% EBITDA margins. You’ve just lost 2 points of margin unless you act.
Six Actions To Take Before The End Of January
Rebuild your landed cost model using current quoted rates, not 2023 averages. If you’re still running a budget based on US$2,300 per FEU out of Shanghai, every Q1 sell quote you write is losing money.
Lock in Q2 freight contracts now with one or two core carriers, even if the rates feel high. Spot rates could keep climbing if the Red Sea stays closed through March. Having 60% to 70% of your volume on contract protects you from another Drewry-style spike.
Have your insurance broker issue written endorsements for Cape of Good Hope routing and get current war-risk premium quotes for your top three IMDG classifications. Put these in a file where your purchasing team can see them against each PO.
Call your downstream customers about any fixed-price Q1 and Q2 commitments. Flag the landed cost shift honestly. The ones who understand the market will absorb a pass-through increase. The ones who don’t will hear about it from a competitor first and you’ll lose the account anyway.
Bring forward your Chinese New Year pre-build. Purchase orders placed by 22 January have a realistic chance of loading before the factory shutdown. Beyond that date you’re accepting both the Red Sea delay and the CNY pause stacked together.
Start a conversation with alternative origin suppliers. India’s specialty chemical sector, particularly out of Mumbai, JNPT, and Mundra, is seeing increased interest. Korean producers out of Busan and Gwangyang are another option for certain chemistries. Neither avoids the Red Sea problem entirely for Europe-bound cargo, but they can shorten the Pacific and Australia legs and give you supplier diversification for 2025 planning.
If you want us to benchmark your current freight rates against market, review your insurance coverage against the Cape routing scenario, or run a Q2 landed cost stress test for your product mix, reach out to the Sourzi team this week. The faster you move, the more options you’ll keep.