Prepare For A Rates Spike In Next Few Months

7 September – Don’t expect any relief from the current level of ocean freight rates as these are likely to continue spiking in the latter half of the year. This comes as the cost of shipping containers has reached historical highs following the outbreak of Covid-19 around the world last year. As capacity plummeted, rates skyrocketed, reaching unprecedented levels.

According to Michael Braun, vice president of customer solutions at ocean and air freight rate benchmarking and market analytics platform, Xeneta, Covid-19 has changed the sea freight sector for good – and rates are not expected to see any real decline in the short term.

“We have seen rates exploding in the past year, increasing five, six and even seven times more than before. On some trade routes, rates reached five-digit figures, with short-term increases of more than 600%.”

Speaking during an online conference, he said the two-month-long economic crisis of 2020 had driven up rates like never before, while service reliability had dropped to an all-time low. “We are looking at a situation with peak-level rates, but the lowest possible reliability levels, which at one point dropped to 10%.” Simply put, shippers were paying 600% more to move their cargo on some routes where the only certainty was that the vessel would not sail – the reliability was that low. According to analysts, a set of Covid-induced factors have caused the current strain on the maritime supply chain.

“The swift return of trade played a role,” said Braun, indicating that policy support in various markets had supported increased household income and expenditure, while growth in e-commerce had been evident around the world. This saw cargo volumes quickly return to pre-pandemic levels – and this resulted in tight capacity on vessels. At the same time, local quarantining policies, social distancing and the new normal working environment have impacted not only port operations but all logistics players, which means that container turnaround times have decreased.

Port congestion and container shortages have become serious challenges. He said supply capacity was not increasing fast enough to catch up with demand. “There is little sign of relief in the short term, and rates are therefore likely to continue spiking in the second half of this year, as rising global demand will continue to be met with limited increases in shipping capacity and the disruptive effects of local lockdowns,” reads a report by economic and financial analysts ING. Sebastian Wagner, regional buyer, EMEA procurement at international shipping company INEOS Styrolution, said the current situation was one of serious concern.

“We have seen major shifts in the market and uncertainty prevails. While volumes dropped in 2020 amidst spiking rates, we have seen a decent return to trade, yet no indication of rates returning to pre-pandemic levels at all. As shippers, we need to start preparing ourselves for increased freight rates going forward.” Source (Freight News)