Ocean Freight Rates from China to the West Surge Amid Demand and Disruptions

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As the holiday season approaches, exporters are making a hurry to get their goods from China to the West. Coupled with the disruption caused by the Red Sea crises, ocean freight rates from China are surging, creating a sticky situation for exporters. The Shanghai Containerized Freight Index (SCFI), a key indicator of container shipping rates, soared by a whopping 12.6% to 3,044.77 last week, breaking the 3,000-point threshold for the first time since August 2022.

According to expert freight forwarders, the upward trend is expected to continue as more exporters secure slots on vessels bound for the US and Europe. The combination of increased demand and limited capacity may lead to elevated rates and increased delays. Even though the price spikes might not reach pandemic-era extremes, the chance is that they could still significantly impact the market.

Traditionally, Chinese exporters begin shipping goods ordered by Western buyers for Christmas and New Year in July. However, panic set in early this year after US President Joe Biden announced last month his plans to impose punitive tariffs on USD 18 billion worth of Chinese goods, including EVs, battery parts, and solar cells. Although these tariffs have yet to take effect, the announcement has spurred exporters to act quickly.

Currently, the cost of shipping a 20-foot container from Shanghai to Europe exceeds USD 7,000, a USD 1,000 increase from a month ago, according to Xiong Hao, Assistant General Manager at Shanghai Jump International Shipping. There is also a shortage of empty containers in Shanghai due to heightened demand from exporters.

According to a recent research report by HSBC, depleted inventories among US retailers have forced them to depend on imports to meet the demand, further boosting the need for container transport. Additionally, escalating US-China trade tensions have prompted manufacturers to expedite shipments.

The current situation is not something new for exporters in China. In fact, for the last 4 years, starting with the COVID-19-induced lockdowns, exporters have been booking shipping slots for up to 10 times the normal rates – all of it to ensure the pent-up global demand is met.

By September 2022, however, shipping container prices from Shanghai to the US plummeted by nearly 90% from their peak. Despite this volatility, Shanghai’s ports have shown resilience, handling 49.16 million 20-foot equivalent units in 2023, a 3.9% year-on-year increase and a 13.5% rise from 2019. The city maintained its title as the world’s busiest container port in 2023, a position it has held since 2010 when it surpassed Singapore.

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