Box rates now four times higher than pre-pandemic

Container freight rates are experiencing a significant upward trend, positioning the third quarter to potentially be one of the most profitable in liner history. The recent rate increases observed in July seem to be taking effect, contributing to this optimistic forecast.

Drewry composite global index saw a 10% rise yesterday, reaching $5,868 per forty-foot equivalent unit (FEU). Although this is 43% below the pandemic peak of $10,377 in September 2021, it is still 313% higher than the pre-pandemic average of $1,420 in 2019.

All four major east-west trade routes, tracked by Drewry, have more than doubled their rates since early May. Lars Jensen, founder of Vespucci Maritime consultancy, noted that the transpacific routes to both the east and west coasts are particularly booming.

The Shanghai Containerized Freight Index (SCFI) also saw an increase today, rising by 19.48 points to 3733.8, marking its highest level since August 2022.

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A report from Jefferies investment bank highlighted that Asia-US routes are nearing the highs seen during the 2021/2022 peak, although other markets are still below those levels. Judah Levine, head of research at Freightos, predicts that the early peak season starting in May could lead to an early end, with congestion and rates peaking in July and August, potentially easing by October before pressure builds up again ahead of the Lunar New Year.

Levine pointed out the dramatic rise in shipping costs for goods such as Weber gas grills from China to the US, now costing $30 per grill compared to $5.60 last year and under $5.30 in June 2019. Typically, ocean freight costs account for about 1% of a grill’s price, but they now represent approximately 6%.

“This spike may force importers to choose between absorbing these costs or passing them on to consumers,” Levine suggested.

Retailers worldwide have issued profit warnings in recent weeks, citing high shipping costs reminiscent of the pandemic era.

This news article offers a concise overview of the current state of container freight rates and their impact on the global shipping industry.