Sea freight rates spike with peak season on horizon

Eye-opening increases in sea freight rates have been ongoing for over two weeks, coming as something of a bolt from the blue. The crisis in the Red Sea, ongoing since December, led to significant increase in rates in the first weeks but then calmed down. So where does the latest price hike come from?

In the week ending 24 May, the Drewry index on the route from Shanghai to Rotterdam increased by 20% compared to the previous week.

In just seven days, it went from $ 4,172 for a 40-foot container to $ 4,999. Slightly smaller increases were visible on the route from Shanghai to Genoa. There, in the week of 24 May, prices for a 40-foot container increased by 15% to $ 5,494.

Moreover, the index does not reflect actual prices at all. As The Loadstar website explains, quoting an anonymous source, when the Drewry index showed approximately $ 5,000 per container, the actual transaction prices were in the range of $ 6,000-$ 7,500. The person quoted by the portal said ship owners claim that prices will reach the level of $ 10,000 per container.

Rising demand, an insufficient supply of ships, and a shortage of containers at major export ports in Asia have contributed to rising prices in recent weeks.

The reason for this is the crisis in the Red Sea that’s been ongoing for over half a year, which means that ships to Europe must sail around Africa instead of through the Suez Canal. This adds 7-10 days to the trip, not to mention that it increases the costs for ship owners, who reflect these costs in their rates.

All this leads to congestion in the most important ports such as Shanghai, Ningbo, Xiamen, and Qingdao. The problem also applies to marinas outside China, including Singapore. 

Congestion in ports, shortage of containers, and lack of ships, even a small increase in demand was enough to drive up freight rates significantly. And according to Xeneta’s data, demand for sea transport increased by over 9% in the first quarter of 2024 compared to the first quarter of 2023. Similar trends are also visible on other transoceanic routes. When rates increased by 15-20 percent at the end of May per week towards European ports, the rate index from China to the West Coast of the United States increased by 13% on the way to New York.

Since those crazy increases in May, prices have calmed down a bit. For a moment. In the last week of May, the global WCI index increased “only” by 4%. On the route to Rotterdam, prices were 5% higher than the week before (and amounted to $ 5,270 per container). In turn, sailing to the Mediterranean Sea became 4% more expensive than the previous week.

In the first week of June, prices went crazy again and returned to double-digit increases. In the latest reading of Drewry’s WCI index from 6 June, from Shanghai to Rotterdam, the price was already $ 6,032 – 14% more week-to-week. From China to Genoa, the increase was even greater at 17%, up to $ 6,664 per container.

On routes from Asia to North America, increases were more moderate – 6% to New York and 11% to Los Angeles. In total, the global WCI index increased by 14% to $ 4,716.

Nevertheless, the increase recorded over the last two months brings to mind the gigantic jumps in rates during the pandemic. Looking at the route from Asia to Northern Europe (currently over $ 6,000), on 1 April, the Drewry index for this direction was $ 3,349! Year on year, the current rate to Rotterdam is 315% higher and to Genoa by 214%. 

Source https://trans.info/en/sea-freight-rates-388882