Those hoping that spot rates for container shipping have peaked have little reason for optimism, according to analysts at Xeneta. On May 30, 2024, Xeneta released a note stating that rates could continue to rise, reaching levels seen in 2022 during the post-Covid peak season. Xeneta’s chief analyst, Peter Sand, explains, “Container shipping has seen rapid and dramatic increases throughout May, and this trend will continue with further hikes in spot rates. By June 1st, they will reach levels not seen since 2022, when the Covid-19 pandemic was still causing chaos in supply chains.”
This situation is driven by a mix of uncertainty and turmoil, to the extent that, as Sand adds, “the speed and magnitude of this recent spike have surprised the market, including CEOs of the world's largest container shipping companies.” Central to this situation is, of course, the Red Sea crisis, but port congestion and shippers' decisions to advance imports before the traditional peak season in the third quarter are also significant factors, according to Xeneta.
“Importers have learned lessons from the pandemic, and the simplest way to protect supply chains is to ship as much cargo as quickly as possible,” says Sand. “This is what we are seeing, with some companies telling us they are already shipping holiday season loads in May.” Thus, the situation is more complex than just the Red Sea crisis.
Repercussions are already being felt on land, where several port hubs are experiencing congestion as shipping companies compensate for circumnavigating Africa by increasing container transshipments in Asia and the Western Mediterranean. They are also realigning capacity in other areas, leading to increased rates on routes not affected by the Red Sea, such as those in the Pacific.
Xeneta provides some forecasts for container freight rates in the coming days. Rates for transport from the Far East to the Mediterranean could reach $6,175 per FEU by June 1, while rates for Northern Europe could hit $5,280. Rates from the Far East to the United States are also expected to rise: for the West Coast, they could reach $5,170 per FEU, and for the East Coast, $6,250 per FEU.
So far, the discussion has focused on spot rates, but their increase is also causing problems for shippers with contracts, as Sand points out: “Shipping companies will prioritize shippers who pay the highest rates. This means that cargo belonging to shippers paying lower rates on long-term contracts risks being left at the port. This happened during the Covid-19 pandemic and is happening again now.” Additionally, “we are also seeing shippers hit by new surcharges and forced to use premium services to ensure space on board vessels. In such cases, they have no choice but to pass these costs directly to their customers.”
