Spot freight rates for container shipping start 2024 skyrocketing
by Esra Ersöz - eersoz@chemorbis.com
The bottleneck in the Red Sea , which first started around mid-December, continues to deepen. Spot freight rates for container shipping started the new year with steep increases following the growing tension in the region . The global indexes provided by Drewry and Freightos shot up this past week by 61% and 85% respectively.
Although much of this jump was formed by the rise in spot rates from Asia to West and South Europe that use the Red Sea as a transit route, the other routes – which have not taken a knock from the crisis – have also surged.
Europe suffers the most
Shipments to Europe have taken the largest hit as the Red Sea is the shortest passage from Asia and the Middle East.
Drewry reported a weekly increase of 114% from Shanghai to Rotterdam at $3577/FEU while the Shanghai to Genoa route saw a weekly increase of 115% at $4178/FEU.
Freightos also raised its index for China/East Asia - North Europe by 168% to around $4274/FEU while China/East Asia – Mediterranean route soared by 115% to $5163/FEU. Freightos also reported carriers announced surcharges ranging from $500 to as much as $2,700 per container.
CMA CGM, a French shipping and logistics company, also announced Asia - Mediterranean rates will increase to more than $6000/FEU on January 15.
Both benchmarks reported that these recent levels are way above the pre-pandemic levels in 2019. Before coming back to pre-pandemic norms in 2023, spot freight rates for container shipping saw unprecedently high times particularly between the second half of 2020 and the first half of 2022. The downward correction started in the second half of 2022 to last until the end of the first half of 2023.
US routes also follow higher
Although shipments to and from the US are not affected by the Red Sea crisis, they have spiked, as well, given another roadblock at the Panama Canal.
First, shipments between the US and Asia have already been tackling with the restrictions in the Panama Canal . This had pushed some carriers to take lengthy detours through the Red Sea and the Suez Canal. But now they are being rerouted on even longer voyages around the Cape of Good Hope, South Africa.
Drewry raised its rates on Shanghai to Los Angeles by 30% to $2726 per 40ft container. Similarly, rates on Shanghai to New York increased by 26% to $3,858/FEU.
Freightos also lifted its China/East Asia – US East Coast index by 52% to $3900/FEU while rates to the West Coast soared by 60% $2713/FEU. Freightos attributed this jump to some anticipated shift in demand to the West Coast to avoid the increased transit time to the East Coast.
If the bottlenecks at the Panama Canal and the Red Sea persist, they will eventually underpin transpacific spot rates. Market experts point to the upcoming yearly contract renewal times, the negotiations of which start around February. If these problems are not temporary, then the reflection of such huge price hikes on the contracts will be inevitable, they argue.
From US to Europe, Türkiye: Even rates for intact routes spike
Even though the route from the US to West Europe and Mediterranean countries have not been affected by the crisis, spot freight rates have almost doubled in these destinations. Players attributed it to the recent shift in routes amid the ongoing turmoil.
A trader in Türkiye reported spot container rates at around $3700/FEU this past week, up 80-100% from the previous week.
Middle East’s main gate to Europe and the US is closed
Spot freight rates from the Middle East to Türkiye, Europe, North Africa and the US East Coast have been impinged, as well. Players in Türkiye speculated about freight rates from Saudi Arabia, Qatar and the UAE doubling upon the recent crisis.
Saudi Arabian producers located on the east coast in the Jubail Industrial Area are able to ship for exports, even though they face the challenge of spiking rates to the rest of the world.
However, the producers on the west coast along the Red Sea including Natpet, Yansab and PetroRabigh are having a hard time in exporting given their location at Yanbu and Rabigh. According to sources, they are mulling over sending containers by truck from the west coast to the eastern ports such as Jubail and Dammam for export; although the cost of this transfer does not make it a feasible solution.
Although much of this jump was formed by the rise in spot rates from Asia to West and South Europe that use the Red Sea as a transit route, the other routes – which have not taken a knock from the crisis – have also surged.
Europe suffers the most
Shipments to Europe have taken the largest hit as the Red Sea is the shortest passage from Asia and the Middle East.
Drewry reported a weekly increase of 114% from Shanghai to Rotterdam at $3577/FEU while the Shanghai to Genoa route saw a weekly increase of 115% at $4178/FEU.
Freightos also raised its index for China/East Asia - North Europe by 168% to around $4274/FEU while China/East Asia – Mediterranean route soared by 115% to $5163/FEU. Freightos also reported carriers announced surcharges ranging from $500 to as much as $2,700 per container.
CMA CGM, a French shipping and logistics company, also announced Asia - Mediterranean rates will increase to more than $6000/FEU on January 15.
Both benchmarks reported that these recent levels are way above the pre-pandemic levels in 2019. Before coming back to pre-pandemic norms in 2023, spot freight rates for container shipping saw unprecedently high times particularly between the second half of 2020 and the first half of 2022. The downward correction started in the second half of 2022 to last until the end of the first half of 2023.
US routes also follow higher
Although shipments to and from the US are not affected by the Red Sea crisis, they have spiked, as well, given another roadblock at the Panama Canal.
First, shipments between the US and Asia have already been tackling with the restrictions in the Panama Canal . This had pushed some carriers to take lengthy detours through the Red Sea and the Suez Canal. But now they are being rerouted on even longer voyages around the Cape of Good Hope, South Africa.
Drewry raised its rates on Shanghai to Los Angeles by 30% to $2726 per 40ft container. Similarly, rates on Shanghai to New York increased by 26% to $3,858/FEU.
Freightos also lifted its China/East Asia – US East Coast index by 52% to $3900/FEU while rates to the West Coast soared by 60% $2713/FEU. Freightos attributed this jump to some anticipated shift in demand to the West Coast to avoid the increased transit time to the East Coast.
If the bottlenecks at the Panama Canal and the Red Sea persist, they will eventually underpin transpacific spot rates. Market experts point to the upcoming yearly contract renewal times, the negotiations of which start around February. If these problems are not temporary, then the reflection of such huge price hikes on the contracts will be inevitable, they argue.
From US to Europe, Türkiye: Even rates for intact routes spike
Even though the route from the US to West Europe and Mediterranean countries have not been affected by the crisis, spot freight rates have almost doubled in these destinations. Players attributed it to the recent shift in routes amid the ongoing turmoil.
A trader in Türkiye reported spot container rates at around $3700/FEU this past week, up 80-100% from the previous week.
Middle East’s main gate to Europe and the US is closed
Spot freight rates from the Middle East to Türkiye, Europe, North Africa and the US East Coast have been impinged, as well. Players in Türkiye speculated about freight rates from Saudi Arabia, Qatar and the UAE doubling upon the recent crisis.
From Saudi Arabia to Türkiye, spot rates spiked to as high as $3000-3700/FEU recently, according to some sources, although this is not widely confirmed at the time of press. Meanwhile, Middle Eastern producers started to warn their customers about the additional surcharges of around $1000-1500/FEU applied by shipping carriers, which translates into $40-60 per each ton of material they sell.
Saudi Arabian producers located on the east coast in the Jubail Industrial Area are able to ship for exports, even though they face the challenge of spiking rates to the rest of the world.
However, the producers on the west coast along the Red Sea including Natpet, Yansab and PetroRabigh are having a hard time in exporting given their location at Yanbu and Rabigh. According to sources, they are mulling over sending containers by truck from the west coast to the eastern ports such as Jubail and Dammam for export; although the cost of this transfer does not make it a feasible solution.
Source: www.marineinsight.com
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