With the rebound of the global economy and the recovery of demand for bulk commodities, shipping rates have continued to rise this year. With the arrival of the US shopping season, retailers’ increasing orders have doubled the pressure on the global supply chain. At present, the freight rate of containers from China to the US has exceeded US$20,000 per 40-foot container, setting a record high.
The accelerated spread of the Delta mutant virus has led to a slowdown in the global container turnover rate; the virus variant has a greater impact on some Asian countries and regions, and has prompted many countries to cut off seafarers’ land traffic. This made it impossible for the captain to rotate the tired crew. Approximately 100,000 seafarers were trapped at sea after their tenure ended. The working hours of the crew exceeded the peak of the 2020 blockade. Guy Platten, Secretary General of the International Chamber of Shipping, said: “We are no longer on the cusp of the second crew replacement crisis. We are in a crisis.”
In addition, the floods in Europe (Germany) in mid-to-late July, and the typhoons that occurred in China’s southern coastal areas in late July and recently have further disrupted the global supply chain that has not yet recovered from the first wave of pandemics.
These are several important factors that have led to new highs in container freight rates.
Philip Damas, general manager of Drewry, a maritime consulting agency, pointed out that the current global container shipping has become a highly chaotic and under-supply seller’s market; in this market, many shipping companies can charge four to ten times the normal price of freight. Philip Damas said: “We have not seen this in the shipping industry for more than 30 years.” He added that he expects this “extreme freight rate” to continue until the Chinese New Year in 2022.
On July 28, the Freightos Baltic Daily Index adjusted its method of tracking ocean freight rates. For the first time, it included various premium surcharges required for booking, which greatly improved the transparency of the actual cost paid by shippers. The latest index currently shows:
The freight rate per container on the China-US East route reached US$20,804, which is more than 500% higher than a year ago.
The China-US West fee is slightly less than US$20,000,
The latest China-Europe rate is close to $14,000.
After the epidemic rebounded in some countries, the turnaround time of some major foreign ports slowed to around 7-8 days.
The soaring freight rates have caused the rent of container ships to rise, forcing shipping companies to give priority to providing services on the most profitable routes. Tan Hua Joo, executive consultant of Alphaliner, a research and consulting firm, said: “Ships can only profit in industries with higher freight rates. This is why the transportation capacity is mainly transferred to the United States. Put it on trans-Pacific routes! Promote freight rates continue to rise)” Drewry general manager Philip Damas said that some carriers have reduced the volume of less profitable routes, such as trans-Atlantic and intra-Asia routes. “This means that the latter’s rates are now rising rapidly.”
Industry experts analyzed that the new crown pneumonia epidemic at the beginning of last year slammed the brakes on the global economy and triggered the disruption of the global supply chain, which resulted in a skyrocketing ocean freight. Jason Chiang, director of Ocean Shipping Consultants, said: “Whenever the market reaches the so-called equilibrium, there will be emergencies that allow shipping companies to increase freight rates.” He pointed out that the congestion of the Suez Canal in March was also an increase in freight rates by shipping companies. One of the main reasons. “The newbuilding orders are almost equivalent to 20% of the existing capacity, but they will have to be put into operation in 2023, so we will not see any significant increase in capacity within two years.”
The monthly increase in contract freight rates soared by 28.1%
According to Xeneta data, long-term contract container freight rates rose by 28.1% last month, the largest monthly increase in history. The previous highest monthly increase was 11.3% in May this year. The index has risen by 76.4% this year, and the data in July has risen by 78.2% over the same period last year.
“This is a truly breathtaking development.” Xeneta CEO Patrik Berglund commented. “We have seen strong demand, insufficient capacity and supply chain disruptions (partly due to COVID-19 and port congestion) leading to higher and higher freight rates this year, but no one could have expected such an increase. The industry is running at a speeding speed. .”
Post time: Aug-10-2021