OCEAN freight container shipping spot rates are expected to reach levels not seen since Covid-19 was causing chaos on ocean supply chains.
According to data released by ocean freight rate benchmarking and market analytics platform Xeneta, the latest round of increases will hit early this month, when market average spot rates are expected to reach US$5170 per FEU, marking a 57% increase during the month of May.
By comparison, rates at the height of the Red Sea crisis reached US$4820 on 1 February, and the expected June rates will be the highest in 640 days since 2022 when Covid-19 was still causing problems.
While Xeneta’s report highlights conditions on the main east-west trades the assessments are still relevant when anticipating impacts and freight outlook for the Oceania region.
Xeneta’s chief analyst Peter Sand said: “There is a cocktail of uncertainty and disruption across global ocean freight supply chains at present and this is fuelling the spot rate increases. However, it is the speed and magnitude of this recent spike that has taken the market by surprise – including the CEOs of the world’s biggest ocean freight liner companies”.
Ongoing conflict in the Red Sea, port congestion, and shippers frontloading imports ahead of traditional peak season are some of the major factors behind the rate increases.
On the latter, Mr Sand explained: “Importers have learned lessons from the pandemic and the most straightforward way to protect supply chains is to ship as many of your goods as you can as quickly as possible. That is what we are seeing with some businesses telling us they are already shipping cargo for the Christmas period in May.
“The early arrival of peak season is adding to the cocktail of uncertainty in the market. Back at the start of 2024 you could point to the Red Sea crisis as the root cause of spot rate increases, this time around it is far more nuanced,” he explained.
While the June increases are undoubtedly further bad news for shippers, Mr Sand says there is some room for optimism: “While average spot rates will increase again on 1 June, the growth is not as rapid as it was during May, which may hint towards a slight easing in the situation.”
The Xeneta findings suggest that as carriers will continue to push for ever higher freight rates, the situation for shippers may get worse before it gets better.
