Neither the busy Chinese New Year in Asia nor the important Black Friday and Christmas in Europe and America, the international shipping market suddenly experienced a surge in freight rates in what should have been a dull June.
According to the main route container spot price index FBX compiled by shipping platform Freightos, international sea freight has increased from approximately $1200 per trip in 2023 to nearly $4500 currently, which is more than 30% higher than the peak of $3400 triggered by the sound of Red Sea artillery in January.
According to AXSMarine analyst Jan Tiedemann, the shipping capacity has been continuously increasing this year. In 2023, newly delivered container ships increased their capacity by 2 million 20 foot equivalent containers, setting a historical record. The shipping market is expected to increase its capacity by 3 million TEUs this year, and an additional 2 million TEUs will be added by 2025.
The industry believes that the factors driving the abnormal increase in sea freight rates are very complex. One reason is that the global manufacturing industry is recovering, especially in Germany, where the year-on-year growth rate of the S&P Purchasing Managers Index in May reached its fastest level in 22 months. In addition, strikes have occurred in major German ports, which has made many exporters eager to find sufficient transportation capacity.
On the other hand, the rise of protectionism has also prompted many exporters to accelerate the delivery of goods to avoid being affected by subsequent tariffs and other policies.
Due to the US government’s announcement of a significant increase in tariffs on some Chinese goods, analysts at Industrial Bank have pointed out that some traders are competing for transportation capacity, and some tariff measures are expected to take effect as early as August. On the other hand, the European Union is also negotiating tariffs on electric vehicles with China, further exacerbating concerns among international traders.
As the world’s three largest economies, the trade trends of China, the United States, and the European Union are undoubtedly key influencing factors in international trade. In addition, Europe and the United States have entered an election year this year, and the rise of far right forces in Europe and Trump’s return to the White House have cast a shadow over the global supply chain.
In addition to the aforementioned factors, the tense situation in the Red Sea itself is also constantly increasing the cost of sea transportation. Especially for Eurasian goods passing through the Mediterranean, they now need to detour around the Cape of Good Hope, taking an additional two weeks to complete the voyage. This means that traders need to invest more ships to achieve flow balance.
According to AXSMarine, new ships with a total capacity of 1 million TEUs have been put into use this year, but the proportion of idle fleets has decreased to 0.6%. This is the lowest level since February 2022, far below the health level of 3%.
Freightos estimates that shipping costs on certain routes may rise to $9000 in the coming months. Although the negative effects of tariff turmoil and port strikes will gradually subside later on, the Red Sea crisis remains severe, which means that the high cost of international freight is difficult to see a solution in the short term.
Post time: Jun-28-2024