The Shipping Crisis Is Getting Worse, And The Freight Rate May Triple Again?

Sea and air freight rates benchmarking and market analysis platform Xeneta said Monday that eastbound long-term deals across the Pacific in 2022 will be stronger than in previous years as retailers and other importers prioritize vessel capacity and service over freight rates. Significant increase in service contracts signed.

"For most shippers, securing the capacity they need will be more valuable than a carrier's commitment to getting the lowest rates," Xeneta said in a statement.

Xeneta said the average price of long-term agreements on the west coast for the past three months was $6,548/FEU, while the average price on the east coast was $10,100/FEU, as importers "flocked to the east coast to avoid the congestion and associated risks on the west coast. "

Average 3- to 12-month contract rates from Asia to the U.S. West Coast for the three-month period from Dec. 1 to February increased by 125% compared to the same period last year and an increase from pre-pandemic, Xeneta said. 350%. Contracted rates on the East Coast since December 1 are up 160% year-on-year and 300% higher than in 2019.

Xeneta's statement follows last week's TPM22 conference in Long Beach, where shippers, carriers, NVOs and industry analysts said U.S. sea and land congestion will reduce vessel capacity this year Tight, delaying tariff relief for retailers and other importers until 2023 at the earliest.

Last fall, operators began signing service contracts with their most popular customers, with reported West Coast rates ranging from $6,000 to $8,000/FEU, more than double the roughly $3,000/FEU rate in 2021-22, with large Sections expire May 1. Contract prices have risen further in the past two months as shipping lines have turned their attention to midsize cargo owners and NVOCCs.

“Transpacific rates are catching up with spot market rates,” Alan Murphy, CEO and partner at maritime consultancy Seaintelligence, told TPM22.

Congestion on the sea and land side reduces capacity

Shipping lines are showing unprecedented strength in contract negotiations in 2022-23, driven in part by strong import volumes, but also because supply chain bottlenecks at Asian and U.S. ports are reducing the effective capacity of carriers to deploy ships. Thorsten Meincke, director of air and ocean freight at freight forwarder DB Schenker, noted that ship operators are slowing voyages from Asia to better adjust arrival times at U.S. ports based on berths and labor availability.

According to Meincke, capacity on the trans-Pacific route increased by 31% last year, but effective capacity fell between 8% and 25% in different periods due to delays or slow sailings in ports, resulting in a "boom in interest rates".

U.S. imports from Asia rose 4.5% in January from a year earlier to a record 1.7 million TEUs, after rising 14.4% for all of 2021, according to IHS Markit's PIERS. While industry analysts and carrier representatives say import growth will slow to a more normal single-digit rate this year, supply chains are so loaded that they will continue to reduce the effective capacity of ships deployed in the transpacific. 

Russia-Ukraine conflict may lead to soaring total cost of container freight

The Russian-Ukrainian conflict has exacerbated the already intractable supply chain crisis. According to Sea-Intelligence, the global container industry consumes an estimated 63.9 million tonnes of fuel annually, and if fuel prices remain at current levels, the annual cost will increase by $7 billion.

"While fuel prices have been on an upward trend since the beginning of the year, it is clear that they have also risen sharply following the outbreak of the Russian-Ukrainian conflict," the analyst firm said, adding $19 million to the total cost on March 4 alone. 

It is reported that about 30% of the operating costs of shipping companies are oil prices. The rise in oil prices means that the costs of shipping companies are increasing, and shipping costs are increasing. Shipping companies increase freight accordingly, and ultimately customers pay for oil prices.

The shipping crisis has intensified, and the freight rate has tripled?

Glenn Koepke, an expert at FourKites, a supply chain consultancy, said recently that the conflict may cause another blow to the global supply chain, leading to skyrocketing prices for sea and air freight. The freight rate per FEU on the route from China to the United States may double or triple the current rate, that is, from USD 10,000 per 40-foot container to USD 30,000.