Sky-High Container Rates Spur Shipper Anxiety

The shipping industry is experiencing significant disruptions as container rates continue to soar, causing anxiety among shippers about their cargo being rolled.

The Shanghai Containerized Freight Index (SCFI) has risen by 140 points to 3184.87, the highest since August 2022. Similarly, Drewry’s composite World Container Index jumped 12% to $4,716 per FEU, marking a 181% increase compared to the same week last year and 232% above pre-pandemic rates from 2019.

Key Factors Driving Rate Increases:

Early Ocean Peak Season: The peak season has arrived earlier than usual, straining capacity and schedules.Red Sea Diversions: These diversions are worsening congestion and creating equipment shortages.High Spot Rates: Spot rates have climbed significantly, often several thousand dollars above long-term contract levels, making annual agreements unreliable.

Judah Levine, head of research at Freightos, stated, “With capacity and equipment scarce and spot rates now several thousand dollars above long-term contract levels, annual agreements are once again becoming unreliable.”

This sentiment is echoed by Emily Stausboll, an analyst at Xeneta, who emphasized the critical nature of relationships between carriers, shippers, and freight forwarders during these times.

A recent Freightos survey found that nearly 70% of BCOs and forwarders with long-term ocean contracts have faced containers being rolled, pushed to the spot market, or forced into contract renegotiations.

“In speaking with a high-level executive from one of our carriers Friday, he pointed out that almost every port in the major trades has roll-over pools stretching 2-3 weeks now. While their larger shippers have a fixed weekly allocation and the carriers are more obligated to take these bookings, assuring those containers are actually loaded is not as certain. As the clock ticks down to the day of sailing, the carriers see all the desperate, last-minute, spot cargo hoping to snag a spot on the vessel and can’t help themselves.” – Stephanie Loomis, Head of Ocean Freight for the Americas, Rhenus Logistics

Craig Fuller’s Predictions:FreightWaves CEO Craig Fuller is optimistic about a recovery in the trucking industry in the second half of 2024. He pointed out that container volumes bound for the US are returning to 2021 levels, driven by retailer confidence in consumer demand for the latter half of the year. Fuller remarked, “Ocean freight always ends up in trucking or intermodal at some point.”

He also noted that tender rejections out of Los Angeles are hitting two-year highs, driven by increased import demand. “What happens in LA eventually happens in the rest of the country,” Fuller said, underscoring his bullish outlook.

Sources: Splash247 | Craig Fuller/X