Ocean freight rates – up or down?

I am asked regularly what’s happening with ocean freight rates. Is there any relief coming? Are they going up or down?

To attempt any prediction of where the market may be going, I think we need to look at what’s happening elsewhere around the globe particularly in the much larger trade lanes China – USA / China – Europe which will have direct bearing on what happens in our part of the world.

There is certainly plenty of discussion and articles written over the momentum of shipping rates and whether these will taper back when “normality” returns or are higher rates going to entrench themselves and become the new norm.

Surging freight rates in Q4 2020 continued into Q1 2021. In Q2 2021 we have experienced rate increases but not at the levels seen in the previous 6 months. Thus, extremely high ocean freight rates have lasted for months now. On some trade lanes rates are expected to rise again in June.

Shanghai – Los Angeles and Shanghai – New York have been in the extreme zone since Q3 2020, the Shanghai-Rotterdam and Shanghai Genoa since Q4 2020.

Due to the Suez Canal incident cancelled sailings have jumped. For example, week 18 saw nine sailings cancelled. This equates to 6% of scheduled sailings will not happen.  It is expected that China-Europe trade lane will rise again come June. This is concerning because if we see increased rates on the large, voluminous trade lanes then we are bound to see increases in our own trade lanes – I expect everything will increase proportionally. Port congestion in US ports combined with container equipment shortages are inhibiting the supply side of the market. Price is also being driven by the ship lines as they are able to make fortunes. If there is a price incentive, then ship lines will allocate equipment in favour of those high yielding trade lanes at the expense of lower yielding / lower volume markets (read: New Zealand).

I expect ocean freight rates 2021 to rise but not as much as we saw end of 2020 / beginning of 2021. I think the cards remain firmly stacked in favour of the ship line present day.

On the plus side I have seen reports predicting a fall in pricing come 2022. The rationale to this is that the extreme levels we are seeing today are driven by big increases in traffic volumes coinciding with large operational disruptions to the port as well vessel networks. It is expected that these “disruptors” will significantly reduce Q4 2021 onwards.

Lets hope so!

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