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U.S. freight rates soar nearly 50 percent, Red Sea routes disrupted, inflationary risks increase
Jan 17,2024
The Red Sea crisis triggered a global chain reaction in freight rates,In addition to soaring freight rates from Asia to the Mediterranean in Europe, freight costs from Asia to the United States have also risen sharply.S & P GlobalMarket intelligence pointed out that container ships were forced to bypass the Cape of Good Hope in Africa, resulting in a chain reaction of freight rates.
Suez CanalAs an important trade route between Europe and Asia, since the conflict between Israel and Hamas broke out in October last year, the 40-foot container freight rate from North Asia to Europe has soared by 600, reaching 6000 US dollars. At the same time, the 40-foot container freight rate from North Asia to the U.S. East has soared 137 percent to $5100 since early October last year, while the freight rate from North Asia to the U.S. West has also risen 131 percent to $3700.
JPMorgan Chase warned that if global transportation costs continue to rise, it will lead to higher commodity prices, and the consumer price index may increase in the next few months.This could stall the central bank's progress in fighting inflation in the coming months, undermining market expectations that the Fed will start cutting interest rates in March.
Freight rates rise 7 in a row, the U.S. line makes a big profit, the European line turns a profit.
The Red Sea crisis intensified and freight rates in Europe and the United States rose wildly. According to the latest issue of Shanghai export container freight index SCFI data,U.S. freight rates soared more than 40%, European lines surged more than 10%, pushing the SCFI index up for seven consecutive weeks.,Breaking through the 2200-point mark in one fell swoop.Since December 2023, the effect of price increases in the Red Sea region has led to a surge of more than 2.6 times in European lines and 1.4 times in US lines.
Regarding the impact of the shipping industry, industry insiders admitted that the Red Sea crisis has transformed the operation of the European line from loss to profit, while the originally profitable U.S. line has made more profits. This crisis involves the game of great powers, the economic interests of many countries and religious factors. It is full of variables and difficult to solve in the short term.
A large number of ships from Asia to Europe and the East of the United States make a detour to the Cape of Good Hope.It may continue into the first quarter or even the first half of the year.This helps maintain high freight rates and absorb excess capacity. However, over time, the increase in freight rates may be limited, the key lies in the market supply and demand situation. Only when the freight rate matches the volume of goods, the increase in freight rates can be maintained.
Peter Sand, chief analyst at freight platform Xeneta, said: "The longer this crisis lasts, the greater the disruption to global shipping and the costs will continue to climb.The crisis is expected to last for months, not just weeks or days, before any sort of resolution is reached.”
Europe has been continuously affected by the conflict between Russia and Ukraine and the Red Sea crisis, and its economic performance is not as expected, and demand is weak. In contrast, the US economy is more likely to achieve a soft landing, and the people continue to consume, which provides support for the freight rate of the US line and continues to rise. Therefore, a number of shipping companies and freight forwarders predict that the U.S. line will become the main source of profit for shipping companies.
The recovery of demand in Europe and the United States, in general, depends on the Lunar New Year, March will be clearer, if the United States interest rate cuts and inflation is under control, demand is expected to pick up.
At present, many shipping companies and freight forwarders expect the Red Sea crisis to last longer. Previously, the shipping company had decided to continue to bypass the Cape of Good Hope, which increased the round-trip voyage from Asia to Europe by nearly two to three weeks. Since mid-December 2023, the world's major shipping companies have successively suspended traffic to the Red Sea,The industry estimates that starting in the second half of January, there may be a shortage of ships and containers in Asia. The rise in freight rates will also spill over to major routes.
As the European line and the Mediterranean line require more ship investment, many shipping companies have begun to dispatch ships from the United States, South America and other routes, which has led to a shortage of capacity on the American line. In addition, the U.S. economy has a greater chance of a soft landing, and the people continue to consume, making the U.S. line shipments better than the European line a year ago. This is a key factor driving the U.S. line freight rate rally stronger.
The latest issue of Shanghai Shipping Exchange data show that the current SCFI reported 2206.03 points,16.3 percent growth. According to the Shanghai Shipping Exchange, China's export container shipping market still faces a complex geographical situation. Driven by the rise in freight rates on European and American routes, the composite index continues to rise, but the market freight rates on some routes have shown a downward trend.
European routes:The situation in the Red Sea region is complicated, and the future situation in the region still faces great uncertainty. This week, the European route space continued to be tight, the average ship space utilization rate of nearly 100, market freight rates continue to rise.
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The freight rate of the Far East to Europe route is3103USD/TEU, up $232 from the previous period,8.1 percent increase;
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The freight rate for the Far East to Mediterranean route is4037USD/TEU, up $417 from the previous period,11.5 percent increase.
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The freight rate from the Far East to the United States is$3794/FEU, up $1019 from the previous period,43.2 percent increase; -
The freight rate from the Far East to the East is5813USD/FEU, up $1882 from the previous period,47.9 percent increase.
On the near-ocean line:Each TEU from the Far East to Kansai and Kanto, Japan, fell by US $2 and US $1 respectively from the previous period. Each TEU from the Far East to Southeast Asia rose by US $50 or 19.3 percent from the previous period. Each TEU from the Far East to South Korea rose by US $2 from the previous period.
The latest NCFI index on the Ningbo Shipping Exchange rose 17.1 per cent from last week.
Dreary World Container Index WCI Current PeriodUp 15%.
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Shanghai to RotterdamFreight rates soar 23%, I .e., up $829 to $4406/FEU. -
Freight rates from Shanghai to GenoaUp 25%, I .e., $1035 to $5213/FEU. -
Freight rates from Shanghai to Los AngelesUp 2%, or $64 to $2790/FEU. -
Freight Rates from Shanghai to New YorkUp 8%, or $312, to $4170/FEU.
Druri expects spot freight rates on the east-west route to rise in the coming weeks due to the Red Sea/Suez Canal situation.
Source: Shipping Network
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