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Nightmare! The shipping price soared to $10,000! No matter how high the freight is, you still can’t book a space

2024-05-09 16:32

Freight forwarders are warning customers that demand for Asia-Europe shipping is starting to resemble that seen during the peak of the pandemic.

A British freight forwarder said that the speed and pace of this change are shocking and have once again reproduced the tense situation at the peak of the epidemic. The freight forwarder warned that shipping companies have canceled FAK rate quotes when booking space and are also reducing contract capacity.Nightmare! The shipping price soared to $10,000! No matter how high the freight is, you still can’t book a space.

“The current situation is a nightmare for importers,” the freight forwarder described. “Demand is climbing and our customer base has grown by 10-20% year-on-year. Either customers are replenishing inventory or because of the detour around the Cape of Good Hope. Longer shipping times require an additional two weeks of shipping buffer stock.”

Scan Global Logistics also warned customers that westbound sea freight rates in Asia are "surging". The company said: Continued capacity demand, blank sailing plans and pessimistic predictions about the prospects of the Red Sea crisis have combined to drive rapid increases in ocean freight rates.

Shipping companies are implementing peak season surcharges and GRI on "long-term and short-term contracts", and Hapag-Lloyd, Mediterranean Shipping Company and CMA CGM have all announced increases in ocean freight rates from the Far East to Europe. However, the British freight forwarder revealed that the freight rates announced by the shipping companies were quickly withdrawn because they had been replaced by higher prices.

"Currently, most shipping companies' FAK, spot booking and mechanisms are now closed until June or later, so even if customers are willing to pay higher prices, they cannot book space," the freight forwarder said.

Unrelated routes have also been affected. For example, freight rates on the Asia-Latin America route have increased significantly. The current freight rate is US$9,000 to US$10,000 per 40 feet, and capacity is being transferred to more profitable routes.
In addition, contract and spot rate levels have begun to diverge. Long-term contract rates are very different from short-term rates, with some differences even exceeding US$3,000 per 40 feet DC. Shipping lines are increasingly prioritizing and loading higher-revenue cargoes to mitigate dismal financial results in Q4'23 and, to some extent, mediocre results in Q1'24.

Container shortage, prices climbing

Part of the problem also stems from a shortage of containers. Container Xchange customers say that while inventory levels are not putting significant pressure on warehouses, container prices are "continuing to climb, adjusting approximately every 48 hours." This is mainly due to the uncertainty related to the Red Sea situation and the desire of suppliers and sellers to hedge risks.
The price of a 40-foot container has climbed from US$2,200-2,300 in April to US$2,500-2,700 currently. The detour around the Cape of Good Hope absorbed a "significant number" of containers, and a significant number of containers were also stranded there. Due to high transportation costs, relatively low storage costs, and the fact that the containers themselves are nearing the end of their useful life, it may not be economically feasible to ship these containers out.

Scan Global is asking customers to "understand" the current predicament, which it expects will continue into May. The British freight forwarder further emphasized that the new capacity has not had a positive impact on the current difficulties and has not played a role in the return of containers to Asia.、

The company warned that this was just the beginning of an explosion of capacity shortages and shipping moving further north, and that even paid participation might not be able to save the crisis. However, the company also noted that demand could fall as fast as it rises, with the market expected to fall faster than it rises after China's October Golden Week.

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