Ocean Freight Market Rates Skyrocket on June 1 Amid Market Disruptions: Xeneta

Ocean freight container shipping spot rates are poised to surpass the levels experienced during the height of the Red Sea crisis as the latest round of increases takes effect on June 1, according to data released by Xeneta today.

Peter Sand, Xeneta’s Chief Analyst, noted: “The ocean freight container shipping market has experienced rapid and dramatic increases throughout May, and this trend is set to continue with further growth in spot rates. On June 1, spot rates will reach levels unseen since 2022, when the COVID-19 pandemic severely disrupted ocean freight supply chains.

“There is a mix of uncertainty and disruption across global ocean freight supply chains at present, fueling the spot rate increases. However, the speed and magnitude of this recent spike have taken the market by surprise, including the CEOs of the world’s largest ocean freight liner companies.”

The market increases in numbers:           

Far East to US West Coast: Market average spot rates are expected to hit USD 5,170 per FEU on 1 June, surpassing the Red Sea crisis peak of USD 4,820 seen on 1 February. This marks a 57% increase during May and the highest rates on this trade for 640 days.

Far East to US East Coast: Spot rates are anticipated to reach USD 6,250 per FEU, just below the Red Sea crisis peak of USD 6,260, reflecting a 50% increase since April 29.

Far East to North Europe: Spot rates are set to exceed the Red Sea crisis peak, reaching USD 5,280 per FEU compared to USD 4,839 on February 16. This will be the highest rate on this trade for 596 days, a 63% increase since April 29.

Far East to Mediterranean: Spot rates are expected to surpass the Red Sea crisis peak of USD 5,985 per FEU on January 16, reaching USD 6,175 on June 1. This represents a 46% increase during May and the highest rates on this trade for 610 days.

Factors Behind the Recent Spike in Spot Rates:

Xeneta’s latest data reveals that the market is heavily impacted by several factors, including ongoing conflict in the Red Sea, port congestion, and shippers frontloading imports ahead of the traditional peak season in Q3.

Sand explained: “Importers have learned from the pandemic, and the most straightforward way to protect supply chains is to ship goods as quickly as possible. Some businesses are already shipping cargo for the Christmas period in May.

“The early arrival of peak season adds to the market’s uncertainty. Earlier in 2024, the Red Sea crisis was the primary cause of spot rate increases, but this time it’s more nuanced.

“Ocean freight carriers have attempted to mitigate Red Sea diversions by increasing transshipments in the Western Mediterranean and Asia, causing severe port congestion in several hubs. Carriers have also re-aligned capacity from other major trades to manage longer sailing distances around the Cape of Good Hope on services from the Far East to Europe and the US East Coast, contributing to increased rates on trades such as the Transpacific, which do not transit the Suez Canal.

“Everywhere you look, there are knock-on impacts and unintended consequences, further fanning the flames of uncertainty in the ocean freight container shipping industry.”

Despite the 1 June spot rate increase being another blow for shippers, Sand sees a potential silver lining: “While average spot rates will rise again on 1 June, the growth is not as rapid as it was in May, hinting at a possible easing of the situation.

“This is crucial for shippers whose cargo is being rolled, even those on long-term contracts signed only weeks ago. Carriers prioritize shippers paying the highest rates, putting those on lower-rate long-term contracts at risk of their cargo being left at the port, a scenario reminiscent of the COVID-19 pandemic.

“Freight forwarders are also facing new surcharges and being pushed onto premium services to guarantee space onboard ships, often passing these costs directly to their shipper customers. Carriers will continue to push for higher freight rates, so the situation may worsen for shippers before it improves.”

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