Ceasefire agreement reached. When will Red Sea routes resume?
According to Xinhua News Agency, on the evening of January 15, 2025 local time, Israel and the Palestinian Islamic Resistance Movement (Hamas) reached an agreement on the ceasefire in the Gaza Strip, and the first phase of the ceasefire agreement will be formally implemented on January 19, 2025.
It is reported that during the ceasefire, as the second phase of the agreement, Israel will negotiate with Hamas to achieve a permanent ceasefire. Israeli Prime Minister Benjamin Netanyahu stressed that the agreement will seek a "long ceasefire" in exchange for the release of all hostages, but does not mean an end to the war.
Large liner companies are sailing around the Cape of Good Hope to avoid the waters of the Red Sea for safety reasons. Factors such as rising operating costs and tight capacity caused by detour have pushed up freight rates on Asia-Europe routes. Shanghai export container Freight Index (SCFI) sub-route spot market freight data show that the average Asia-Europe route in 2024 is 3131.96 points, an increase of 255.11%.
The Gaza ceasefire agreement between Israel and Hamas has become the focus of attention of the shipping industry, whether it will prompt the Houthi armed forces to stop attacking commercial vessels, whether liner companies will return to the Red Sea, and whether freight rates on Asia-Europe routes will fall.
In this regard, Zheng Jingwen, deputy director of the International Shipping Research Institute of the Shanghai International Shipping Research Center, told the China Shipping Weekly reporter: "The ceasefire agreement will not have much impact on the spot market freight rate." Because the spot market mainly depends on the reaction of the liner company, such as whether the liner company decides to resume the flight. Recently, the spot market freight rate of the Asia-Europe route has declined, mainly due to the end of the shipment peak at the end of the year, and the lack of cargo support. News of the current ceasefire agreement is likely to have an impact mainly on the futures market."
Zheng Jingwen analyzed that since 2024, the ceasefire negotiation process between Israel and Hamas has been more tortuous, and there is greater uncertainty in the negotiation process. During the period, the two sides have also reached a ceasefire agreement, but the Houthis have not stopped attacks on commercial vessels. Whether the ceasefire agreement can be effectively implemented and enforced remains to be seen.
As for whether the ceasefire agreement will have an impact on the choice of new alliance routes, Zheng Jingwen explained to China Shipping Weekly reporter: "Whether the liner company will resume sailing to the Red Sea, the most important thing is to determine that there is no longer a risk of conflict in the Red Sea, and the Houthi armed forces will no longer attack commercial vessels." The major alliances and Mediterranean shipping companies have prepared for the Red Sea crisis by offering two sets of routes via the Cape of Good Hope and the Red Sea, which can flexibly respond to emergencies."
In view of the impact of the ceasefire agreement on futures freight rates, Zhang Xinghao, a researcher of the Bank of China Futures consolidation index, told China Shipping Weekly: "From the plate point of view, the ceasefire news has a significant impact on the plate price. As of 10 am on January 16, 2025, the main contract of the European line futures of the container index (EC2504) fell by nearly 8%, the EC2506 and EC2508 contracts fell by nearly 9%, and the EC2512 far month contract fell by more than 10%. In the afternoon, futures narrowed down, as of 15 p.m., EC2504 closed at 1240.2 points, down 2.48%. EC2506 and EC2508 were down 4.58% and 6.29% respectively, while the EC2512 front-month contract was down 7.38%."
Zhang Xinghao analyzed that since 2024, the ceasefire between Israel and Hamas has occupied a key position in the pricing of far-month contracts on the futures board. Once the two sides achieve a comprehensive ceasefire to stop the war, the Asia-Europe route denavigation problem is expected to be solved, then the cost of transport capacity will be significantly reduced.
At the same time, more than 500 new ships will be launched in 2024, and a large number of new capacity will be released. If the diversion is stopped, the tight balance between supply and demand in the market in 2024 is likely to quickly turn into excess capacity. It can be seen that the change in the price of the futures far month contract fully reflects the market's expectations of the future supply and demand pattern.
Zhang Xinghao also stressed: "The current ceasefire between Israel and Hamas, although it affects the expectations of the plate, but does not ensure that the navigation situation will be improved." Yemen's Houthi leader, Abdul Malik al-Houthi, made it clear in a televised address that attacks on targets in the Red Sea would stop only after the people of Gaza receive humanitarian aid, including food and medicine, and Israel stops its operations in Gaza. As of January 2025, Israel and Hamas are still in the first phase of the ceasefire, and there are still major political obstacles and external political risks before Israel completely stops operations in the Gaza Strip, so it is highly unlikely that the Asia-Europe route will end its circumnavigation in the short term."
He believes that from the perspective of the plate situation, the geopolitical risk factors facing the Asia-Europe route market will further increase in 2025. The external effects of the political game are likely to continue to impact freight rates. Comprehensive analysis, it is expected that in 2025, the European line futures will show a situation of slow decline in a large shock.
Zhao Yifei, head of the shipping industry team of the Industry Research Institute of Shanghai Jiao Tong University and executive secretary general and senior researcher of the Shanghai Shipping Fifty Development Research Center, also told China Shipping Weekly reporter: "If the Houthi armed forces announced that they would stop attacking ships in the Red Sea waters, it will have a great impact on the Asia-Europe route market, when the freight rate is inevitable, the freight rate has returned in the early stage." More importantly, the return of capacity to the Red Sea route will significantly reduce transit times and have a significant impact on the supply chain."
Zhao further stressed that the Red Sea crisis will not end soon. The central reason for the ceasefire agreement between Israel and Hamas is the hostage issue. It remains to be seen whether Israel will resume fighting once the hostages are released.
On October 7, 2023, Israel launched a large-scale military operation against the Gaza Strip after Hamas attacked civilian and military targets inside Israel from the Gaza Strip. Houthi fighters in Yemen have attacked targets in the waters of the Red Sea and the Arabian Sea, demanding a ceasefire in the Gaza Strip.
It is reported that during the ceasefire, as the second phase of the agreement, Israel will negotiate with Hamas to achieve a permanent ceasefire. Israeli Prime Minister Benjamin Netanyahu stressed that the agreement will seek a "long ceasefire" in exchange for the release of all hostages, but does not mean an end to the war.
Large liner companies are sailing around the Cape of Good Hope to avoid the waters of the Red Sea for safety reasons. Factors such as rising operating costs and tight capacity caused by detour have pushed up freight rates on Asia-Europe routes. Shanghai export container Freight Index (SCFI) sub-route spot market freight data show that the average Asia-Europe route in 2024 is 3131.96 points, an increase of 255.11%.
The Gaza ceasefire agreement between Israel and Hamas has become the focus of attention of the shipping industry, whether it will prompt the Houthi armed forces to stop attacking commercial vessels, whether liner companies will return to the Red Sea, and whether freight rates on Asia-Europe routes will fall.
In this regard, Zheng Jingwen, deputy director of the International Shipping Research Institute of the Shanghai International Shipping Research Center, told the China Shipping Weekly reporter: "The ceasefire agreement will not have much impact on the spot market freight rate." Because the spot market mainly depends on the reaction of the liner company, such as whether the liner company decides to resume the flight. Recently, the spot market freight rate of the Asia-Europe route has declined, mainly due to the end of the shipment peak at the end of the year, and the lack of cargo support. News of the current ceasefire agreement is likely to have an impact mainly on the futures market."
Zheng Jingwen analyzed that since 2024, the ceasefire negotiation process between Israel and Hamas has been more tortuous, and there is greater uncertainty in the negotiation process. During the period, the two sides have also reached a ceasefire agreement, but the Houthis have not stopped attacks on commercial vessels. Whether the ceasefire agreement can be effectively implemented and enforced remains to be seen.
As for whether the ceasefire agreement will have an impact on the choice of new alliance routes, Zheng Jingwen explained to China Shipping Weekly reporter: "Whether the liner company will resume sailing to the Red Sea, the most important thing is to determine that there is no longer a risk of conflict in the Red Sea, and the Houthi armed forces will no longer attack commercial vessels." The major alliances and Mediterranean shipping companies have prepared for the Red Sea crisis by offering two sets of routes via the Cape of Good Hope and the Red Sea, which can flexibly respond to emergencies."
In view of the impact of the ceasefire agreement on futures freight rates, Zhang Xinghao, a researcher of the Bank of China Futures consolidation index, told China Shipping Weekly: "From the plate point of view, the ceasefire news has a significant impact on the plate price. As of 10 am on January 16, 2025, the main contract of the European line futures of the container index (EC2504) fell by nearly 8%, the EC2506 and EC2508 contracts fell by nearly 9%, and the EC2512 far month contract fell by more than 10%. In the afternoon, futures narrowed down, as of 15 p.m., EC2504 closed at 1240.2 points, down 2.48%. EC2506 and EC2508 were down 4.58% and 6.29% respectively, while the EC2512 front-month contract was down 7.38%."
Zhang Xinghao analyzed that since 2024, the ceasefire between Israel and Hamas has occupied a key position in the pricing of far-month contracts on the futures board. Once the two sides achieve a comprehensive ceasefire to stop the war, the Asia-Europe route denavigation problem is expected to be solved, then the cost of transport capacity will be significantly reduced.
At the same time, more than 500 new ships will be launched in 2024, and a large number of new capacity will be released. If the diversion is stopped, the tight balance between supply and demand in the market in 2024 is likely to quickly turn into excess capacity. It can be seen that the change in the price of the futures far month contract fully reflects the market's expectations of the future supply and demand pattern.
Zhang Xinghao also stressed: "The current ceasefire between Israel and Hamas, although it affects the expectations of the plate, but does not ensure that the navigation situation will be improved." Yemen's Houthi leader, Abdul Malik al-Houthi, made it clear in a televised address that attacks on targets in the Red Sea would stop only after the people of Gaza receive humanitarian aid, including food and medicine, and Israel stops its operations in Gaza. As of January 2025, Israel and Hamas are still in the first phase of the ceasefire, and there are still major political obstacles and external political risks before Israel completely stops operations in the Gaza Strip, so it is highly unlikely that the Asia-Europe route will end its circumnavigation in the short term."
He believes that from the perspective of the plate situation, the geopolitical risk factors facing the Asia-Europe route market will further increase in 2025. The external effects of the political game are likely to continue to impact freight rates. Comprehensive analysis, it is expected that in 2025, the European line futures will show a situation of slow decline in a large shock.
Zhao Yifei, head of the shipping industry team of the Industry Research Institute of Shanghai Jiao Tong University and executive secretary general and senior researcher of the Shanghai Shipping Fifty Development Research Center, also told China Shipping Weekly reporter: "If the Houthi armed forces announced that they would stop attacking ships in the Red Sea waters, it will have a great impact on the Asia-Europe route market, when the freight rate is inevitable, the freight rate has returned in the early stage." More importantly, the return of capacity to the Red Sea route will significantly reduce transit times and have a significant impact on the supply chain."
Zhao further stressed that the Red Sea crisis will not end soon. The central reason for the ceasefire agreement between Israel and Hamas is the hostage issue. It remains to be seen whether Israel will resume fighting once the hostages are released.
On October 7, 2023, Israel launched a large-scale military operation against the Gaza Strip after Hamas attacked civilian and military targets inside Israel from the Gaza Strip. Houthi fighters in Yemen have attacked targets in the waters of the Red Sea and the Arabian Sea, demanding a ceasefire in the Gaza Strip.
