The sea freight have been rapidly increasing from Q1, the European and American routes have doubled to $8,000 per container within just a month and a half. This surge has left not only outsiders but also industry insiders stunned.
This price hike is occurring during the traditional off-season for foreign trade. What factors are driving this surge? What impact does it have on foreign trade companies and international logistics?
Following last October's price hike in European shipping routes due to the Houthi crisis, a new wave of price increases began in April this year, once again affecting China's import and export industry. According to industry sources, major shipping companies such as Maersk, CMA CGM, and Hapag-Lloyd have issued price increase notices over the past two months, with some routes experiencing increases of nearly 70%. The cost of a 40-foot container has risen by up to $2,000.
Regarding the North American routes, the Ningbo Shipping Exchange noted that transportation demand remains strong. While additional vessels have slowed the rate increase, container shortages persist, keeping overall prices stable. The East Coast route price index rose by 0.4% from the previous week, while the West Coast route remained flat.
Recently, Mediterranean Shipping Company (MSC), Maersk, and CMA CGM have announced rate adjustments for several routes.
MSC announced that from July 1 to July 14, 2024, the all-in-one rate (FAK) from all Asian ports (including Japan, Korea, and Southeast Asia) to Europe would rise to a maximum of $9,800. This is double the rate previously announced for Northern Europe in May.
Maersk announced a Peak Season Surcharge (PSS) from July 1, 2024, for shipments from Chinese ports to Bangladesh. Additionally, starting July 7, 2024, Maersk will impose a PSS for the Asia-Pacific to the US and Canada until further notice. The charges will be $1,000 per 20-foot container and $2,000 per 40-foot container/high cube and 45-foot container.
CMA CGM announced a Port Congestion Surcharge (PCS) to Dammam, Saudi Arabia, starting June 20, with rates of $300/TEU and $600/FEU. From July 1, 2024 (bill of lading date), the rate from China to West Africa will be adjusted to $500/TEU.
On June 21, the market rate for shipping from Shanghai to major European ports was $4,336/TEU, up 3.8% from the previous period. The Mediterranean route saw a slight increase of 0.1%, in line with the European route trends.
A small to medium-sized freight forwarder stated, "Spot container prices are increasing weekly. There are quotes close to $10,000 for the US routes."
Typically, March and April are the shipping off-season, with the peak season starting in July. So, what factors are driving the current off-season capacity crunch and rising freight rates?
According to industry experts, there are four main reasons:
1. European Routes: The European routes have long been affected by the Red Sea crisis, forcing ships to detour around Africa. However, the capacity of African routes is limited, and this year has seen an influx of ships, leading to longer sailing times, more transshipment ports, and congestion at some ports. This has prolonged the turnaround time for many vessels.
2. South American Routes: The price increase in South American routes is due to the anticipation that Brazil might impose tariffs on Chinese new energy vehicles in the future. Many car companies are rushing to South America, increasing demand for these routes. Additionally, some shipping companies have diverted ships from the West African routes to cater to the large orders from car companies in South America, resulting in insufficient capacity and rising freight rates for West African routes.
3. Tariff Anticipation in the US: There is strong anticipation within the industry that the US might impose tariffs on certain Chinese goods. This expectation has led some importers to stock up in advance, bringing the peak season forward.
4. Shipping Giants' Collective Price Hike: Major shipping companies are collectively raising prices. Export enterprises need to plan their shipping schedules in advance, leading to a rush for containers.
5. Extreme Weather Conditions: Extreme heat has led to droughts in many parts of the world, and marine warming has caused extreme weather disasters. These factors have caused significant disruptions to shipping routes and ports.
These combined factors have led to the current surge in shipping prices during the traditional off-season.