As the recovery of global commodities trade accelerates after the 2023 recession, ocean freight costs have recently shown a remarkable spike. “The situation harkens back to the chaos and soaring ocean freight rates during the epidemic,” said a senior shipping analyst at Xeneta, a freight analytics platform.
Clearly, this trend not only harkens back to the chaos in the shipping market during the epidemic, but also highlights the serious challenges currently facing global supply chains.
According to Freightos, a 40HQ container freight rates from Asia to the U.S. West Coast have risen 13.4% over the past week, marking the fifth consecutive week of an upward trend. Similarly, spot prices for containers from Asia to Northern Europe have continued to climb, more than tripling from the same period last year.
However, industry insiders generally believe that the catalyst for this rise in ocean freight costs does not stem entirely from optimistic market expectations, but is caused by a combination of factors. These include congestion in Asian ports, possible disruptions to North American ports or rail services due to labor strikes, and rising trade tensions between the U.S. and China, all of which have contributed to the spike in freight rates.
Let’s start by looking at recent congestion at ports around the world. According to the latest data from Drewry Maritime Consulting, as of May 28, 2024, the average global wait time for container ships at ports has reached 10.2 days. Among them, the waiting time at the ports of Los Angeles and Long Beach is as high as 21.7 days and 16.3 days respectively, while the ports of Shanghai and Singapore have also reached 14.1 days and 9.2 days respectively.
Particularly noteworthy is the fact that container congestion at the Port of Singapore has reached an unprecedented level of criticality. According to Linerlytica’s latest report, the number of containers in the Port of Singapore is increasing dramatically and the congestion is exceptionally serious. A large number of ships are queuing outside the port waiting to berth, with a backlog of more than a staggering 450,000 TEUs of containers, which will put extreme pressure on supply chains across the Pacific region. Meanwhile, extreme weather and equipment failures by port operator Transnet have resulted in more than 90 ships waiting outside the port of Durban harbor.
In addition, rising trade tensions between the U.S. and China have also had a significant impact on port congestion.
The recent announcement of more tariffs on Chinese imports in the US has led many companies to import goods earlier in order to avoid potential risks. Ryan Petersen, founder and CEO of San Francisco-based digital freight forwarder Flexport, said on social media platforms that this import strategy of worrying about the new tariffs has undoubtedly exacerbated congestion at U.S. ports. However, perhaps even more frightening is yet to come. In addition to U.S.-China trade tensions, the threat of a railroad strike in Canada and contract negotiation issues for U.S. dockworkers in the eastern and southern U.S. have importers and exporters worried about market conditions in the second half of the year. And, with the peak shipping season arriving early, port congestion within Asia will be difficult to alleviate in the near term. This means that shipping costs are likely to continue to rise in the short term, and the stability of the global supply chain will face greater challenges. Domestic importers and exporters are reminded that they need to keep an eye on the freight information and plan their import and export in advance.
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Post time: Jun-12-2024