As the New Year approaches, ocean freight rates may rise sharply again due to the impact of high overseas demand and the peak shipping period before and after the New Year!
Shipping companies adjust surcharge rates on Asia-Europe and trans-Pacific routes
The spot freight index in the past week has remained basically unchanged, according to the Baltic Freight Index (FBX):
European routes: The mutated strain of Omicron has caused the European epidemic to continue to rebound, and the recovery process of the supply chain system has slowed down.
However, the relationship between supply and demand is good, transportation demand is stable, the average space utilization rate of ships is close to full load, and the freight rate trend is stable. The freight rate from Asia to Northern Europe is stable at US$14,496/FEU;
North American routes: The epidemic in the United States has continued to worsen recently, coupled with the continued spread of Omicron, the number of new cases per day has returned to more than 100,000, and the pace of economic recovery is showing signs of slowing down.
However, supply and demand are stable, transportation demand continues to remain high after the traditional transportation peak season, and the average space utilization rate of ships is close to the full load level. Asia-US West and US East freight rates are US$14,862/FEU and US$16,828/FEU respectively.
However, it is understood that shipping lines are preparing to introduce GRI and FAK of up to USD 1,000/FEU on the entire Asia-Europe and trans-Pacific routes from January 1, and in some cases will also reintroduce equipment and space guarantees Premium.
In addition, more unwelcome news for shippers is that this quarter’s increase in oil prices will trigger an upgrade in the way carriers calculate fuel surcharges starting January 1. For example, CMA CGM will increase the fuel surcharge calculation for the first quarter of 2022. Asia-North Europe BAF is adjusted to 345 US dollars/TEU.
Judah Levine, director of research at Freightos, pointed out that the recent outbreak in Zhejiang, including the Omicron variant, may cause further disruption to the supply chain and increase pressure on rates.
Intra-Asia shipping rates are also soaring
A freight forwarder in Shanghai said that 90% of container ships are delayed after leaving Chinese ports, and congestion bottlenecks at destination ports are to blame.
“After nearly two months of low freight rates, ocean freight prices have risen again. The overall freight volume outside China is less, but the disruption of overseas logistics chains and the inefficiency of port loading and unloading are the main reasons for the sharp increase in freight rates.”
Intra-Asia trade routes from China to Vietnam, Thailand, Bangladesh and Sri Lanka are all in high demand as factories in these regions have recently reopened due to the lifting of lockdowns and require large quantities of raw materials from China.
“Before the epidemic, the normal freight rate to these destinations was about US$200-300, and the highest price last year was US$2,000. Now, some freight rates have exceeded US$3,000.” The cargo said.
European shipping costs will increase 2.5 to 5 times next year
Meanwhile, shipping data consultancy Xeneta, a freight comparison analysis platform, said most 2022 contract rates will be met “at record high levels” based on the first data it has obtained from its shipper users. .
Long-term contracts for European routes in 2022 have been signed recently. Xeneta said the average price of long-term contracts signed in the Asia-Nordic region in the past three months was US$11,900/FEU.
Given that the global shipping industry is currently in a seller’s market, shipping companies, in addition to significantly increasing long-term contract prices by 2.5 to 5 times, not only have to select customers when signing new contracts, but also reject small and medium-sized customers.
In addition, the strategies adopted by carriers are also different. For example, Hapag-Lloyd requires a signing period of three years; while Maersk generally does not sign long-term contracts with customers, and the binding terms of new contracts have also increased significantly!
Due to the contract price that took effect in the past year (2021), the freight rate per large box (40-foot container) is only between 2,000 and 4,000 US dollars based on the signed volume and transportation conditions, which has soared with the spot market later. Compared with the sea freight, the difference is too far.
Maersk said in October this year that a 40-foot container costs about US$4,000, but the market price reaches US$20,000. It is evident that agents make huge profits from it!
Maersk also encourages direct shippers to skip the intermediate links and book space directly in the future. This may also be the reason why Maersk adjusts its operating strategy.
Peter Sand, chief analyst at Xeneta, said shippers need to decide whether they have “any real alternatives” to agreeing to accept these record-high rates.
“While the sheer level of long-term rates that are about to emerge may come as a surprise, the fact that they are tracking spot market movements should not come as a surprise as long-term and short-term rates are related,” he said.
Xeneta said, the importance of the stability and predictability of global supply chains will be “the top priority for many shippers as they enter these difficult negotiations.”
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