Spot ocean container rates rise 61% in a single week

Category: General

Country: United Kingdom

By Bobby Dalheim
Senior Editor of Case Goods and Global Sourcing
4th January, 2024.

London: Spot ocean container rates rose a whopping 61% on average this week to $2,670 per 40-foot container, pushing them 88% higher than they were pre-pandemic.

Rates are up across all routes but are up dramatically to Europe. From Shanghai to Rotterdam in The Netherlands, rates rose 115% to $3,577, according to shipping tracker Drewry. Shanghai to the U.S. saw rates rise 30% to $2,726, while Shanghai to New York rose 26% to $3,858.

The culprit is the conflict in the Red Sea, which escalated this past week with a missile attack and attempted hijacking of a Maersk ship. As a result, several of the world’s biggest ocean shippers – including Maersk and Germany’s Hapag-Lloyd – cancelled plans to restart transits through the Red Sea.

Carriers instead are opting to circumvent Africa through the Cape of Good Hope, which adds up to 14 extra days to a ship’s journey. Nearly 15% of all global maritime trade passes through the Red Sea, making it a critical path for trade.

Last week, the U.S., Japan and 10 other nations issued a warning to militants.

“The Houthis will bear the responsibility of the consequences should they continue to threaten lives, the global economy, and free flow of commerce in the region’s critical waterways,” the countries said in a joint statement.

In a press conference this week, White House spokesperson John Kirby said the rate increase is not yet affecting American consumers.

“The Red Sea is a vital waterway, and a significant amount of global trade flows through it,” he said. “By forcing nations to go around the Cape of Good Hope, you’re adding weeks and weeks onto voyages, and untold resources and expenses have to be applied in order to do that. So obviously there’s a concern about the impact on global trade.”

“It would depend on how long this threat goes and on how much more energetic the Houthis think they might become,” he said. “Right now, we haven’t seen an uptick or a specific effect on the U.S. economy. But make no mistake: This is a key international waterway. Countries more and more are becoming aware of this increasing threat to the free flow of commerce.”

The conflict is coinciding with a time of poor demand, per CNBC, with blank (or cancelled) sailings being common. Capacity is down 20% as a result, also fueling higher rates.

Alan Baer, CEO of shipping firm OL-USA, told CNBC that higher costs will trickle down to consumers eventually.

“Companies, reflecting lessons they learned during the supply chain chaos of 2021-22, will adjust prices sooner rather than later,” he said.

Courtesy: Hfd.bridgetowermedia.com