Spike in freight rates year-on-year in October

Monday, 21 October 2024 00:45 - - {{hitsCtrl.values.hits}}

Container freight rates oscillated dramatically between January 2023 and October 2024, according to Statista Research Department.

Freight rates slumped to their lowest level on the 26 October 2023, when the going rate for a 40-foot container was only $ 1,342. Since then, the global freight rate has significantly increased, hitting over $ 5,900 in July 2024, the highest value on record. As of 10 October 2024, freight rates decreased to $ 3,349 per 40ft container.

The global supply chain is a fragile system consisting of numerous links. Disruption to one, can send cascading effects down a chain, that needs to function properly for the whole system to work. The COVID-19 pandemic turned out to be an event of such a magnitude to either bring to halt whole industries and supply chains, or severely reduce their efficiency. Due to its complexity and transcontinental nature, container shipping was hit especially hard by the COVID-19 pandemic. Since the start of the pandemic, the shipping industry has had to struggle with port closures and congestions, labour shortages, difficulties with capacity utilisation, as well as a lack of new shipping containers. In more recent months, the impact of the conflict in the Middle East between Israel and numerous Islamic nations has had a significant effect on oil exports in the region, further exacerbating an industry in desperate need of recovery.

While costs of operating a container fleet have increased, the surge in freight rates has not served just to cover rising expenses. Container ship operators had been reporting record-high operating profit margins since the beginning of the pandemic. However, despite these high profit margins, the freight rate increase has had some repercussions. In the second quarter of 2023, main container shipping companies had an average profit margin of 8.9%, a decrease of almost 50% compared to the peak EBIT in the first quarter of 2022. Despite this decrease, some of the carriers are combating this trend by using their previous profits to increase their carrying capacity by buying new containers and ordering new container ships. However, the delivery of these newly ordered ships is still years away.