Drewry's World Container Index (WCI), released on 20 June, showed that the WCI was up 7 per cent this week from last week to $5,117 per container.Drewry said that in terms of recent freight rates, the latest figure was up 233 per cent on the same period last year and 260 per cent above the pre-2019 epidemic average of $1,420.
Container freight rates have continued to rise since the end of 2023. The Red Sea crisis has caused ships to bypass the longer Cape of Good Hope route between Asia and Europe. Market supply and demand remain volatile as the container shipping industry still suffers from a structural overcapacity, coupled with ongoing vessel deliveries. But as long as the Red Sea remains effectively closed, supply and demand will remain tight.
Source: Drewry World Container Index
Container freight rates for exports from China are expected to continue to rise next week due to congestion issues at Asian ports, Drewry noted. Disruptions are occurring at both ends of the Asia-Europe trade, with European ports struggling to handle a surge in cargo volumes, causing delays for ships and spilling over into Asian ports such as Singapore.
The Shanghai Container Freight Index (SCFI) continued to move higher this week with a smaller increase of 2.85 per cent to 3,475.6 points.
The SCFI barely broke 1,000 points in November 2023 and did not break 2,000 points until early this year. After moving slightly lower in March and April, the index has steadily risen from around 1,750 points at the end of April to its current high.
On a longer-term basis, the WCI currently stands at $3,510/FEU, a full $768 above the 10-year average of $2,742/FEU.
So what is the reason for the spike in spot rates? Is it US retailers "stocking up early" to avoid congestion and supply chain disruptions during the usually busy July to September period, or is it the process of inventory replenishment prompted by the 2023 stimulus?
The consensus among analysts favours the former, as many shippers are still fearful of the super-congestion that occurred during the outbreak and are eager to see empty shelves again during their busiest time of the year (the fourth quarter).
Viki Keckarovska, research manager at Transport Intelligence (Ti), said, "I believe this is an early spike, with shippers shipping early to avoid peak season freight spikes and supply chain disruptions."
She added, "U.S. consumer demand is growing, but not at a high enough rate to cause a huge shock to demand.
For U.S. importers, the threat of possible strikes at ports in the eastern U.S. and Gulf Coast is also unsettling.
A recent Ti survey found that the majority of respondents believe that rates on Asia-North Europe routes will rise moderately to significantly in the next quarter, while rates on trans-Pacific routes are expected to rise slightly to moderately.
Viki Keckarovska added that the consensus in the market is that rates will rise further, but not as dramatically as they are now.
If this is the case, then shippers and forwarders will be asking the question - are we approaching the peak of spot rates.
According to Drewry, freight rates from Shanghai to Rotterdam rose $690 to $6,867 per FEU, or 11 per cent, this week compared to the previous week. Freight rates from Shanghai to Los Angeles rose 7% to $6,441/FEU; Shanghai to New York was up 3% to $7,552/FEU, and Rotterdam to Shanghai and Shanghai to Genoa were up 2% to $672/FEU and $7,029/FEU, respectively. rates from New York to Rotterdam and Rotterdam to New York were both down 1% to $633/FEU and $2,093/FEU, respectively. FEU and US$2,093/FEU, respectively.
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