As The Spring Festival Is Approaching, Freight Rates Have Risen Sharply! What Is The Trend After The Year?

In mid-January, the shipping cost to Los Angeles and Long Beach in the west of the United States plunged from a high of ten thousand dollars per container to nine thousand dollars, and even dropped by one or two thousand dollars a day! Recently, the priority transportation market for pre-holiday voyages has been strong. The average space utilization rate of ships to the US West and US East routes has basically remained at full capacity, and the priority transportation price has also risen. The container spot freight price to the US West has risen sharply.

The decline in freight rates is mainly due to changes in supply and demand. Some industry analysts believe that this is because the major shipping companies are intensively arranging ships and transportation capacity in order to seize more cargo volume in the peak season of the previous year. The sentiment broke, and the market quotations began to go down. 

In addition, the freight rate has been greatly increased in the past year, and the freight rate of the US line has risen several times this year, and the European line has doubled, so that the market freight rate has reached an unseen high. The expectation of high freight and high cargo volume has attracted more shipping capacity, and shipowners have begun to invest in overtime ships. Every year, in order to ensure that the ships during the Chinese New Year are also fully loaded, the shipowners usually receive more cargo a week before the festival, and then dump it until the festival. ship of the week.

However, the problem of long waiting times for freighters at ports on the west coast of the United States and Canada remains severe, with cargoes piling up before the Chinese New Year. Affected by the new coronavirus Omicron variant, the number of port workers has decreased. Ocean carriers are still trying to divert inland intermodal cargo to the Pacific Coast Southwest hub instead of in-place due to heavy congestion. Shippers who are in a hurry to be shipped or whose inventory is exhausted and eager to replenish are willing to pay the priority shipping price to obtain valuable space, which also creates a rising trend in freight rates!

What will the shipping cost after the year?

1. The situation of suspension after the year. For example, from Ningbo to West America: Normally there are about 23 sailings a week, 8 sailings are suspended in the 6th week, and 10 sailings are suspended in the 7th week. There are 13 sailings per week in the east of the United States and the Gulf of Mexico normally, 2 sailings are suspended in the sixth week, and 4 sailings are suspended in the seventh week. Considering that the normal suspension or skipping of flights due to port congestion has existed before the festival and will continue after the festival, the suspension after the New Year is within the normal range.

Second, the post-holiday market demand. The latest import forecast from the American Retail Federation is a 9% increase in January this year compared to the same period last year, 7.3% in February, a 3.3% decline in March (the reason for the New Year), and a slight increase of 2.2% in April. These data are calculated by ETA, and basically one month ahead is the time of shipment in Asia (NRF's forecast is usually inaccurate, just take a look). The epidemic in the United States is moving towards normalization, and social consumption is moving towards a post-epidemic era: service consumption is increasing steadily. Compared with the US West, the market capacity of the US East is relatively stable. Once the demand suddenly increases, the freight rate in the US East market will be pushed up. Of course, if the ship owner adjusts the shipping capacity according to the situation and transfers the ship from the west to the east of the United States, it may cause the freight rate on both sides of the strait to rise. Not all customers and shipments can be transferred to the east of the United States, and the demand of the west of the United States is still there. The lower the capacity, the higher the price. In addition, in a short period of time, the demand will increase, and the market freight rate in the US East will be pushed up.

3. As more and more direct passenger contracts are signed in advance, shipowners will begin to fulfill the space commitments in these new contracts after the year (March at the latest). Compared with previous years, this means that shipowners will allocate more space to direct passengers, leaving relatively less space for freight forwarders and the market. For customers who do not have direct passenger appointments, the cost of taking cabins from the spot rate (spot rate) market has risen. If the large and medium-sized direct passengers do not have enough space in the contract price, they have to pay a high spot price to meet the space demand.

4. Recently, due to problems such as 5G signals, multinational airlines announced the grounding of flights to the United States. Many people will ask, will air freight affect sea freight? The answer is of course! If the problem is not resolved, air freight rates are expected to skyrocket next. Industry insiders said that Amazon in the United States has a lot of goods, including computer digital, luxury goods, fast-moving consumer goods and medical supplies, all of which are directly shipped to the United States by air. This outage will lead to more air freight products going by sea/sea rail; in addition, the ports on the west coast of the United States have recently been affected by the tsunami waves of the Tonga volcano, and the sea freight will be further congested. Once the market suddenly picks up or the shipping space suddenly decreases, the spot price of a certain port will be fired very high in the short term, and the price will increase to 15,000 and it will be just around the corner.

The industry expects that there will be another wave of slumping in freight rates after the year, depending on the speed of the recovery of cargo volumes, but the market price is still in a gradual upward trend. Once the wave of early shipments begins in March, and the situation at the Port of Masai will not improve significantly, the price in the United States will have the opportunity to rise again.