Freight rates have seen unprecedented increases over the past year, significantly impacting the cost of sea freight. Over the last 12 months, the cost of shipping a 40-foot container has risen over fourfold. The route from China to North Europe saw a 523% increase, and the China to US west coast route saw a 320% increase. However, recent data indicates a slowdown in these rate hikes.
What is causing the increases in price?
Several factors have contributed to the surge in freight rates. The ongoing Red Sea conflict, which began late last year, forced shipping lines to reroute vessels away from the Suez Canal and Red Sea. This led to increased costs and significant port congestion. The situation was further exacerbated by the drought in the Panama Canal, limiting the number of ships that could pass through, and an incident at the Port of Baltimore, which caused substantial delays and backlogs.
Additionally, record demand for ocean freight shipping has placed immense pressure on the global shipping network. The pandemic-induced surge in e-commerce, coupled with the early onset of peak shipping seasons, has strained capacity and driven prices up. Port congestion has also played a critical role, with key ports around the world struggling to manage the influx of ships and containers.
The pandemic also caused significant disruptions to the labour force, impacting port operations and trucking services. Lockdowns and health regulations have led to labour shortages, slowing down the handling and transportation of goods. This has created bottlenecks in the supply chain, further increasing shipping costs.
Furthermore, the imbalance of container availability has been a persistent issue. With many containers stuck in ports and not returning to their origin points, there has been a shortage of available containers for new shipments. This scarcity has driven up the cost of leasing containers, adding to the overall increase in freight rates.
Global economic recovery efforts have also influenced freight rates. As economies rebound, demand for raw materials and finished goods has surged, leading to increased competition for shipping space. This demand has outpaced the available supply, contributing to the high rates.
Despite some improvement in port congestion and capacity, rates are expected to remain high through the peak season. The resolution of the Red Sea conflict and increased shipping capacity are crucial for stabilizing freight rates.
As the sea freight market faces ongoing volatility, it is essential to plan for increased transport costs and incorporate additional lead time into shipping plans.
Are prices going to come down?
The short answer is not any time soon.
A more comprehensive answer to the question is that the price rises are slowing – mostly due to new ships coming out of Singapore, and taking their excess of containers with them. The backlog of containers in ports in Singapore and the surrounding areas is now being dissipated more quickly than before, so the most recently tracked price rise for ocean freight was only by one percent, a significantly smaller rise than previous updates. But this, in itself, isn’t enough. It is widely considered that the key resolution to this situation is ships beginning to use the Suez Canal again. But the chances of that – especially in the coming months – are very slim.
How can we help?
Hawley Logistics offers comprehensive logistics solutions to navigate these challenges. Our services include efficient sea freight management, ensuring timely and cost-effective transportation of goods globally. We provide tailored logistics strategies, leveraging our expertise to mitigate disruptions and optimize shipping routes. Our capabilities extend to air freight, road transport, and warehousing, and providing a holistic approach to your logistics needs. With a dedicated and experienced team, we ensure seamless coordination and execution of your supply chain operations. Trust Hawley Logistics to deliver reliable and adaptable logistics services to support your business needs.
Contact us to discuss your shipping needs today.
