As the global shipping industry navigates through 2024, container freight rates continue to climb, setting the stage for what could be one of the most profitable quarters in liner history. July has seen significant rate increases, indicating a robust trend that shows no sign of slowing down.
According to Drewry’s composite global index, container freight rates surged by 10% Thursday, reaching $5,868 per FEU (forty-foot equivalent unit). While this rate is still 43% lower than the pandemic peak of $10,377 in September 2021, it represents a staggering 313% increase from the average pre-pandemic rate of $1,420 in 2019. This sharp rise highlights the volatility and the unprecedented demand pressures facing the shipping industry today.
The four major east-west trade lanes, meticulously tracked by Drewry, have seen their rates more than double since early May. Lars Jensen, the founder of Vespucci Maritime consultancy, noted that the transpacific routes to both the east and west coasts of the United States are particularly seeing red-hot demand and soaring rates.
The Shanghai Containerized Freight Index, which reflects the spot rates of shipments from Shanghai, increased modestly by 19.48 points to 3733.8 points. This is the highest level recorded since August 2022, underscoring the persistent upward pressure on shipping costs.
Investment bank Jefferies recently reported that the Asia-US routes are nearing the peak levels observed during the height of the 2021/2022 spike. However, other global routes have yet to reach such heights. This suggests a varied recovery and demand pattern across different shipping lanes.
Judah Levine, head of research at Freightos, emphasized the impact of the early peak season starting in May. Levine predicts that this could lead to the highest congestion and rate levels in July and August, potentially easing by October before ramping up again in anticipation of the Lunar New Year.
Levine also illustrated the real-world implications of these rate increases by highlighting the cost to ship Weber gas grills from China to the US. The cost has skyrocketed to $30 per grill, up from $5.60 last year, and significantly higher than the $5.30 cost in June 2019. This dramatic rise means ocean freight now accounts for about 6% of a grill’s price, compared to the typical 1%.
This surge in shipping costs presents a dilemma for importers: absorb the increased costs or pass them on to consumers. Many retailers worldwide have issued profit warnings, attributing their financial struggles to these soaring shipping expenses.
As Q3 unfolds, the shipping industry remains in a state of flux. While some routes are approaching their pandemic-era highs, others lag behind, suggesting a complex and uneven recovery. Stakeholders across the supply chain are bracing for continued volatility, with potential relief only coming towards the end of the year.
In conclusion, the persistent increase in container freight rates is reshaping the global shipping landscape, presenting both challenges and opportunities. As businesses adapt to these changes, the importance of strategic planning and cost management becomes ever more critical. The coming months will be a crucial period for the industry, with far-reaching implications for global trade and economic stability.
