Shipping rates hit record high again amid Red Sea crisis

Ocean freight rates are approaching record highs as global events such as the Red Sea crisis; port congestion, especially in the Middle East and Asia; imbalance in container repositioning with higher empty container volumes in Colombo and the Gulf compared to China; and strong container demand are seen as the main reasons.

So freight rates are rising again. And the Drewry index is up 2x year-on-year in 2024 as of now. Specifically, as of June 6, the Drewry composite index has increased by 12% to $4,716/40-foot container and has increased by 181% compared to the same period last year. According to estimates, the current composite index is $4,716/40-foot container, 232% higher than the 2019 average (before the Covid pandemic) of $1,420.

Shipping rates hit record high again amid Red Sea crisis

The benchmark freight rate from Shanghai to Genoa increased by 17% or $971 to $6,664 per 40-foot container, while the rate from Shanghai to Rotterdam increased by 14% or $762 to $6,032 per 40-foot container. Similarly, the rate from Shanghai to Los Angeles increased by 11%; while the rate from Shanghai to New York increased by 6%. Drewry expects freight rates outside China to increase further next week due to the early start of the peak season. According to Indian research firm Prabhudas Lilladher, spot rates for June 2024 have already exceeded the $6,000-$10,000 per 40-foot container mark by 3-4 times.

Shipping companies like Maersk have increased their 2024 spending by 50-75%, or $7-$9 billion. Maersk said that container market demand continues to grow strongly, and disruptions from the ongoing crisis in the Red Sea point to further port congestion, particularly in Asia and the Middle East, and further increases in container freight rates.

Ocean freight container shipping rates are expected to rise further, but the pace of growth may be slowing, according to ocean freight rate benchmarking firm Xeneta.

Xeneta data shows that the average spot rate from the Far East to the US West Coast is expected to rise 4.8% to $6,178 per 40-foot container. This is in contrast to a 20% increase for the same trade earlier this month. Similarly, rates from the Far East to the US East Coast will rise 3.9% to $7,114 per 40-foot container, a more moderate increase than the 15% increase from June 1.

The increase, while less dramatic than previous ones, still presents a challenging situation for shippers, as some face the risk of being unable to move containers under existing long-term contracts. Freight rates from the Far East to Northern Europe are expected to rise 10% from June 15, reaching $6,357 per 40-foot container.

Meanwhile, rates from the Far East to the Mediterranean will increase by 7.2% to $7,048 per 40-foot container. Peter Sand, chief analyst at Xeneta, said the market remains challenging due to ongoing conflict in the Red Sea region, port congestion, equipment shortages and potential labor issues at U.S. ports.

With ongoing conflict in the Red Sea region, port congestion in the Mediterranean and Asia, equipment shortages and shippers lining up imports ahead of the Q3 peak season, pressure on the ocean container shipping system remains severe.

The potential impact of rising spot rates on inflation in the US and Europe if these costs are passed on to consumers. Compared to mid-December, average spot rates from the Far East to the US West Coast have increased by 276% and 316% into northern Europe due to conflict in the Red Sea.

However, accurately predicting the market is challenging due to many factors, including potential ceasefires and union activity at US ports. It is unlikely – but not impossible – that spot freight rates will reach Covid-19 levels now, but there are so many factors at play that the market is sure to remain volatile.

Source: https://congthuong.vn/gia-cuoc-van-tai-bien-lai-tang-cao-ky-luc-trong-khung-hoang-bien-do-326672.html