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"I can't grab the box at all!" June 1 ushered in a new wave of price increases; Nightmare! The freight rate soared to $10,000; It will rise by another 2000$ in half a month! Space is full by the end of May...

2024-05-14 09:10

The shipping market has obvious off-peak season characteristics, and the growth of freight rates is generally accompanied by the peak season of shipping. Recently, the industry has set off waves of "price increases" in the off-season. Maersk, CMA CGM, Hapag-Lloyd and other leading shipping companies have issued price increase letters, and have begun to issue a new round of freight rate adjustment notices in June...

"At the end of May, the space was basically gone, and now there is only demand and no supply." The person in charge of a large-scale freight forwarding company told Yicai that a large number of containers are "wandering outside", the port has a serious shortage of containers, and "it is difficult to find a cabin" again. Under such a shortage, the price increase seems logical. "In early May, the U.S. line (freight rate) was almost $4,100 a container (40-foot container), which has risen twice in a row, each time by about $1,000!" He estimates that the price increase will continue and will soar above $5,000 in late May. This also means that the increase in this wave of freight rates will be exponential.

Market analysts pointed out that the current idle capacity in the market is limited, especially in the context of the Red Sea detour, the current capacity is relatively insufficient, and the detour effect is becoming more and more obvious.

Judging from the performance of the current spot freight rate, the Shanghai-Rotterdam route in the Europe-China route was quoted by liner companies in the range of US$4,040-5,554/FEU on May 10, compared with the quotation range of US$2,932-US$3,885/FEU on April 1, which has increased significantly. Similarly, in terms of the U.S. line, the freight rate from Shanghai to Los Angeles and Long Beach has also increased significantly, and the highest price on May 10 reached $6,457/FEU.

Behind this wave of price increases is the superimposed impact of multiple factors. The continued tension in the Red Sea has led to container ships having to circumnavigate the Cape of Good Hope in Africa, prolonging the voyage time and occupying a large number of ships and containers.

The deployment of shipping lines has also exacerbated the tight supply situation. In addition, with the increased risk of strikes in Europe and the United States, the tightness of seaborne supply has further escalated. In the face of such a severe shipping situation, foreign trade enterprises and freight forwarders have felt unprecedented pressure. They have said that the wave of price increases has led to a sharp increase in business costs, and even forced some businesses to be cancelled or postponed. The backlog of goods is serious, and delivery delays have become the norm, which undoubtedly brings great trouble to the operation of foreign trade enterprises.

In this wave of rising sea freight prices, some people also see opportunities. Container manufacturing companies and shipping companies seem to have ushered in spring again. With the recovery of the container business, the performance of these companies is also expected to improve.

For foreign traders, the impact is also intuitive. Recently completed goods have to be delayed and the backlog is serious. "Whether it's the Middle East, Europe, or South America, the shipment to various places is basically delayed!" Mr. Ding, a foreign trader, told Yicai that there are currently about 4 containers of goods that have been postponed, and the latest is nearly a month later than the original time, "the ones that were supposed to be sent in late April have not yet been delivered." Slow delivery will inevitably correspond to slow order returns, and it is also likely to affect the scale of subsequent orders.

Compared with the "uncomfortable" of freight forwarders and foreign traders, the life of shipping companies and container manufacturing enterprises seems to be comfortable again. While Maersk lamented that there were fewer orders for new ships, the latest prosperity of the container industry has returned to the boom range from the original transition range.

The Red Sea situation, detours and other influences are cumulative! Freight rates have risen "crazy".

Behind this wave of "madness" is still attributed to the imbalance of supply and demand - on one end is the shortage of capacity supply, and on the other end is the recovery of market demand.

The reasons for the tight supply are multiple. The main thing is that the impact of the deviation caused by the situation in the Red Sea continues to accumulate. According to Freightos, the circumvention of container ships to the Cape of Good Hope has led to a tightening of capacity on large shipping networks, even affecting freight rates on routes that do not pass through the Suez Canal.

Since the beginning of this year, tensions in the Red Sea have continued, forcing almost all container ships to abandon the Suez Canal route and sail around the Cape of Good Hope in Africa instead. This corresponds to a longer voyage, about two weeks longer than before, and also leaves a large number of ships and containers adrift at sea.
      Due to the geopolitical conflict in the Red Sea, ships around the world have been forced to detour the Cape of Good Hope, which has not only significantly increased transit times, but also led to significant challenges in ship scheduling. Due to the different sizes and scales of ships sailing in Europe every week, it has brought great trouble to customers in booking space. European and American traders have also begun to deploy and replenish inventory in advance to avoid facing the problem of tight space in the peak season in July and August. Industry insiders said that they did not expect that the market demand would be so large after the May Day holiday. Previously, in order to cope with the May Day holiday, shipping companies generally increased the proportion of blank flights by about 15-20%. As a result, there was already a shortage of space on the North American route in early May, and it is now fully booked by the end of the month. As a result, many of the planned shipments will have to wait for the June sailing.

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