Container freight rates have continued to soar recently, what are the causes?
Container spot rates have continued to rise sharply recently, fuelled by the Red Sea crisis, increased demand and concerns about supply disruptions.
A few days ago, the Drewry World Container Index (WCI) rose a further 16 per cent to reach $4,072 per feu on 23 May, 142 per cent higher than in the same period in 2023. This followed increases of 11% and 16% in the two weeks to 16 May and 9 May respectively.
The benchmark Shanghai Container Freight Index (SCFI) rose more moderately, but still surged 7.24 per cent to 2,703.43 points on 24 May. In the previous two weeks, the Shanghai Composite Index had risen 29.8 per cent.
Drewry's WCI showed a sharp rise in both Asia-Europe and Trans-Pacific trade. Freight rates from Shanghai to Rotterdam rose 20 per cent, or US$827 to US$4,999 per 40-foot container; and from Shanghai to Los Angeles rose 18 per cent, or US$801 to US$5,277.
Meanwhile, spot rates from Shanghai to New York rose by $746, or 13 per cent, to $6,463 per feu.
Analysts Maritime Strategy International (MSI) said in its monthly container market report, released ahead of this week's rate data, that shippers were surprised by the unexpected rebound outside the ‘traditional’ peak season. The price increases also affected secondary trades and major routes.
MSI said the increase was likely driven by a combination of the ongoing diversion of the Cape of Good Hope, a stronger-than-expected rebound in demand, and weather delays at major Chinese ports. Shipping service
‘The combination of these factors most likely explains the rise in freight rates outside of the “traditional” peak season, but it is too early to draw conclusions.’ General rate increases by major shipping lines in April and on 1 and 15 May also contributed to the spike in spot rates.’
According to the analyst, shippers in the US and Europe are in the process of replenishing their inventories, while concerns about summer supply disruptions, particularly in the US, may have led to a small ‘early season’.
MSI expects more increases in GRI in June, while Drury said it expects the spike in spot freight rates to ease in the coming months.
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