The large shipping transport companies have increased their rates due to the crisis in the Red Sea. Situation that directly affects the Port of Valencia; main gateway to Spain for goods arriving from Asia. In the case of MSC or Cosco, for example, these rates have tripled in cases of transport from India, Pakistan and Sri Lanka, as can be seen on their websites. MSC is the shipping company that will invest more than one billion euros in the expansion of the Port of Valencia, recently approved by the Spanish Government.
The employers do not hide their concern. The president of the Valencian Business Confederation, CEV, Salvador Navarro, told this newspaper yesterday that the stoppage and diversion of ships “is delaying arrivals at destination, disrupting logistics plans and delivery times and increasing transaction costs. “. “All this, in a context in which companies are already enduring a general increase in their costs (raw materials, energy, financial and salaries),” he added.
In the opinion of the leader of the Valencian employers’ association, this situation adds to the conflict that is already causing increases in gas and oil prices, “which, if it continues, will once again raise the energy costs of companies, and, thus more severe, of companies belonging to the productive branches that are most intensive in energy consumption” such as the ceramics sector. A sector, furthermore, that is markedly exporting.
In MSC’s information, in line with that of other international operators, it is observed that transport prices from India and Pakistan to the European ports of Valencia and Antwerp multiply from between 700 and 1,050 dollars per container, depending on their size, up to 2,200 dollars in the best of cases and 2,550 in the largest transport. The French CMA CGM, which operates one of the port’s terminals with Cosco, has reported rates of $3,500 on average for a 20-foot container from Asia to Valencia and 6,000 for a 40-foot container, both standard sizes. twice as much as two months ago.
Cámara Valencia emphasizes, first of all, that the effect is not only for imports, since many Valencian and Spanish companies operate through the Port of Valencia for export. “One of the direct consequences is the increase in the cost of freight between Asia and Europe and the application of a war risk surcharge,” says a report from the entity. In addition, it is warned that supply chains, especially in Europe, “could be strained again by the delay in the reception and delivery of already containerized goods, the longer navigation time if the Cape of Good Hope route is used and the uncertainty about the evolution of the conflict in the short and medium term”.
It is also highlighted that this conflict also occurs at a time of decline in trade in goods worldwide and a strong economic slowdown and even recession in countries like Germany. “A situation that, if prolonged or worsened, would delay in time the beginning of the recovery path planned for mid-2024,” according to Cámara Valencia.
The Red Sea crisis has a direct impact on the Valencian economy. In 2023, 63% of the total tons that companies in the Valencian Community traded (exports, imports) with the rest of the world were carried out by sea. And a quarter of what is traded by sea goes to the Asian market through the Suez Canal.
Since 2018, Valencian imports from Asia have exceeded exports, maintaining these (in volume) on a downward path in the last decade. Imports from Asia have been recovering after the sharp drop suffered in 2020, although without reaching pre-pandemic levels, according to data from Cámara Valencia.
Despite everything, the business institution assesses that the crisis will not be as intense as that generated by the pandemic in 2021. “The level of freight had been reduced in the last year to pre-pandemic levels. The Maritime transport costs are going to increase, but they will be far from the maximums of 2021. Their impact on final prices will be moderate and will not be noticed until the second quarter of 2024” according to the business organization.
It is also noted that the supply chain crisis of just two years ago forced Valencian businessmen to carry out a process of diversification of their suppliers and better manage supplies. “Therefore, the supply problems generated by this conflict will have a less intense impact on industrial and commercial activity,” they add.
It is also concluded that “no major changes are expected in the evolution of Valencian exports to Asian markets, which will maintain a downward path, except for markets such as India and some ASEAN countries (Taiwan and Singapore) which, due to their dynamism, will keep their behavior on the rise.”
The delay in the economic recovery process of European countries that this conflict may cause will have an impact on the evolution of Valencian exports to these markets in the medium term, according to Cámara Valencia.