In China, after the epidemic control policies were relaxed, the demand for shopping, production and export has increased dramatically. Enterprises have increased production to meet domestic demand and international orders, leading to congestion at major seaports such as Shanghai, Shenzhen and Ningbo.
Meanwhile, the US economy continues to maintain strong purchasing power thanks to low unemployment rates and economic stimulus policies. Major retailers such as Walmart, Amazon and Target are importing large quantities of goods from Asia to meet growing consumer demand. This has increased the demand for shipping containers from China to the US, leading to overload and pushing ocean freight rates to record levels.
Container Freight Rates Increase Sharply - What Are the Main Reasons?
1. Sudden Increase in Shipping Demand
The high consumer demand in China and the US has caused the volume of goods exported from Asia to North America to skyrocket. Shipping routes between the two regions are operating at maximum capacity, leading to a shortage of empty containers and sharp increases in freight rates.
According to Drewry, the container freight rate index from Asia to the US West Coast increased by more than 40% in the first quarter of 2024 compared to the end of 2023. Shipping routes to the US East Coast and Europe also recorded similar increases.
2. Congestion at Major Seaports
Major ports such as Los Angeles, Long Beach (USA) and Shanghai, Shenzhen (China) are facing severe congestion.
In the US, West Coast ports are handling record volumes of containers, while the workforce has not fully recovered from the COVID-19 pandemic.
In China, strict control policies and strict customs clearance procedures have also slowed down the processing of goods, causing containers to backlog at ports.
The result is longer transit times, longer wait times for businesses to receive their goods, and continued increases in container freight rates.
3. Container and Vessel Shortages
One of the key reasons for the sharp increase in container freight rates is the imbalance between supply and demand. Major shipping lines such as Maersk, MSC, and CMA CGM are facing a severe shortage of empty containers.
This is because:
Exports from China and Southeast Asia to the US are increasing, but the number of containers returning is not fast enough to meet the demand.
Delays in new container orders due to the impact of the pandemic have caused container supply to not keep up with the market's recovery.
In addition, high fuel prices and ship operating costs have also contributed to pushing freight rates to record highs.
Impact of Rising Container Freight Rates
1. Importers and Exporters Heavily Affected
The sharp rise in container freight rates is putting great pressure on importers and exporters globally.
Exporters in Asia face higher shipping costs, which increase product prices and reduce their competitiveness in the international market.
Importers in the US and Europe are also greatly affected by rising logistics costs, forcing them to adjust retail prices or cut profits.
2. Consumers Pay Higher Prices
Higher shipping costs lead to higher prices for products reaching consumers. Imported goods such as electronics, clothing, furniture and food are all likely to become more expensive in the near future.
3. Risk of Escalating Inflation
As shipping rates increase, the cost of producing and distributing goods also increases, contributing to continued inflation in many countries. In the US, inflation remains one of the major challenges that the Federal Reserve (Fed) is trying to control.
Container Freight Forecast in the Coming Time
Experts predict that ocean freight rates may continue to remain high in the first half of 2024, before showing signs of cooling down by the end of the year. Some factors that may affect freight rate trends in the coming time include:
Whether port congestion is resolved
Whether shipping lines' capacity can be improved
Whether trade policies between China and the US will change
However, in the short term, businesses still need to prepare flexible logistics plans to respond to market fluctuations.
Delta Logistics - The Optimal Solution to Help Businesses Reduce Transportation Costs
In the context of high container freight rates, choosing a reputable logistics partner will help businesses save costs and optimize the transportation process. S Delta Logistics is proud to be a professional sea freight solution provider, helping customers ensure that goods are transported quickly at optimal costs.
Why Choose S Delta Logistics?
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