Red Sea Shipping Traffic Recovers to 65% of Normal Levels, BofA Reports

Container shipping traffic through the critical Red Sea trade route has recovered to 65% of normal levels over the past two weeks, a significant improvement from 50% in September. The data, from a new Bank of America report on global shipping, suggests a gradual normalization of a key artery for global trade as more container liners return to the route.

Easing Chokepoints

According to BofA's latest supply chain data, the rebound in Red Sea transits comes as major shipping lines continue to restore services, with additional returns currently being planned. This development is a positive signal for goods movement between Asia and Europe.

Globally, port congestion has also shown signs of easing, falling to 10% of the total fleet from recent peaks of 11-12%, driven by improvements in North Asia. However, BofA analysts caution that this relief could be temporary, with potential for congestion to rise again due to disruptions from Typhoon Champi and the "vessel bunching" effect as ships return to normalized Red Sea schedules.

A Mixed Picture for Shipping Rates

While traffic patterns are improving, the report indicates that container rates on long-haul trades appear to have peaked. Quotes for Europe and transpacific routes are holding steady near the levels of the Shanghai Containerized Freight Index, supported by solid off-peak demand and lingering congestion.

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Other segments of the shipping industry present a more varied outlook:

• Tankers: Spot rates have declined from recent peaks but remain elevated. The report cited real Very Large Crude Carrier (VLCC) rates for the Oman-to-China route at $650,000 per day and the U.S.-to-China route at $450,000 per day.
• Dry Bulk: Fourth-quarter rates are tracking 31% higher year-over-year. This comes as Panama Canal transits for bulk carriers remain down 30% year-over-year, despite improving water levels in recent weeks.
• Car Carriers: Demand continues to show strength, growing 9.4% year-over-year in September, contributing to a year-to-date increase of 10.4%.

Implications for Global Trade

The partial recovery of the Red Sea route is a positive development for global supply chains, potentially shortening delivery times and mitigating some of the cost pressures seen when carriers were forced to take longer routes. The apparent peak in container rates may offer some relief for importers.

However, the elevated rates in the tanker and dry bulk sectors, combined with persistent bottlenecks like the Panama Canal, underscore the ongoing pressures within the global logistics network. These factors continue to influence the costs of energy and raw materials, which investors and businesses will monitor closely.