Container ships keep piling up at Singapore port, sending sea freight rates soaring

The port is facing a sustained period of congestion as vessel diversions to avoid the Red Sea push more liners to the Asian maritime hub

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A ferry sails past a container ship and bulk carriers in Singapore. Photo: Bloomberg

Published: 11:28am, 21 Jun 2024

The logjam that’s been plaguing Singapore’s container port is bringing forward this year’s peak season for the shipping sector, spelling trouble for businesses in the city state.

The bunching up of container vessels outside one of the world’s busiest maritime trade hubs – caused by ships avoiding the Red Sea due to Houthi rebels’ attacks – means there’s more cargoes trapped in shipyards for longer. That’s pushing freight rates ever higher, with no immediate end to the congestion in sight.

For the manufacturers and exporters needing to get their finished products out of the city state, that means there may be little choice other than to hold on to their inventories longer than they’d like to.

“The fundamental backdrop remains the same with higher peak season volumes coming” in a shipping market already seeing healthy demand, Jefferies LLC analysts led by Omar Nokta wrote in a note. “Congestion is a growing risk as peak season is under way amid a reshuffling of the fleet.”

The Yemen-based Houthis have been attacking vessels in the Red Sea since last October, in retaliation for Israel’s assault on Gaza. The situation in the vital waterway has intensified from early this year, with a second vessel sinking after being struck.

That had resulted in shipowners opting not to transit the Suez Canal and taking the longer route around the Cape of Good Hope at the southern tip of Africa. That means now they don’t get a chance to refuel or unload cargo at ports in the Middle East, leading to worsening congestion in the waters off Singapore.

A lack of immediate alternatives to Singapore in the region is making the logjam even worse.