Sea freight rates explode

Rate spiral continues upward

The geopolitically driven boom in the freight market continues, with further increases in spot rates in liner shipping last week. In addition, transit times for shipments from the Far East are extending even more than the pure transit times from port to port.

January 15, 2024 | by Michael Hollmann

Shortly before the next general rate increase (GRI) for liner shipping companies, the market continued to rally strongly. The Shanghai Index SCFI jumped 16 percent to over 2,206 points last Friday. The index rates for trades between the Far East and North America saw particularly surprising increases. Spot bookings from Shanghai to the US West Coast rose by 43 percent to USD 3,974/FEU, and from the US East Coast by as much as 48 percent to USD 5,813/FEU. This increase illustrates how the ripple effects of the Red Sea crisis are also affecting trades that do not necessarily pass through the region. The 19 percent increase in the SCFI rate for the intra-Asia trade from Shanghai to Singapore, to USD 309/TEU, also points in this direction.

This is due to increasing equipment shortages in Asia and the capacity shortage due to the additional tonnage requirements for the most affected liner services between Asia and Europe. According to SCFI, spot rates for shipments from Shanghai to Northern Europe and the Mediterranean region increased by 8 percent and 11.5 percent last week, to USD 3,103 and 4,037/TEU, respectively. Other market indices signaled larger price jumps. On the Freightos platform, the average rate for shipments from China to Northern Europe rose by 24 percent to $4,757/FEU. In the World Container Index, prices climbed by 23 percent to $4,406/FEU, while the price information service Xeneta recorded an 18.5 percent increase to an average of $3,741/FEU for short-term rates valid for up to 31 days. Carrier rate increases to around $6,000/FEU will take effect this week.

However, how close spot prices will approach this level is controversial in the market. Critical voices in the ocean freight forwarding industry claim to have already observed a certain slowdown in price increases. “We have seen isolated cases of slight rate reductions,” says one market participant. Others worry that there could be another strong surge in two to three weeks, because parking capacity in the Far East is likely to reach a low point by then. Industry service Linerlytica, among others, warns of this.

In addition to rate increases, importers in Europe must cope with short-term delivery disruptions and a permanent extension of transport lead times. Automaker Tesla had to interrupt production at its Grünheide factory for two weeks at the end of January due to a lack of deliveries. Peter Sand, Head of Research at Xeneta, warns of an increase in transit times from the factory in Asia to the receiving warehouse in Europe of three weeks. In addition to the detour around the Cape of Good Hope, this is also due to the cancellation of port calls to shorten round-trip ship times. Loading ports in northern China, such as Dalian, are increasingly being removed from schedules. Accordingly, shippers are forced to transport their goods from the north by truck, rail, or barge to southern ports such as Shanghai and Ningbo, which requires significantly more lead time, according to Sand. (jpn)