Since the introduction of peak season surcharges (PSS) and new Freight All Kinds (FAK) levels on 1 July, the largest east-west container trades have witnessed a significant surge in spot freight rates. After a period where the focus was primarily on the escalating rates for Asia-Europe trades, the spotlight has shifted to the Asia-North America routes, which are now experiencing substantial rate increases.
Drewry’s World Container Index (WCI) reported a 12% increase for its Shanghai-Los Angeles route, reaching $7,472 per 40ft container, while Xeneta’s XSI for the Asia-US West Coast route showed a rate of $7,648 per 40ft. The Shanghai-New York leg also saw a sharp rise, with WCI recording a 17% increase to $9,158 per 40ft, and XSI reporting $9,146 per 40ft.
This trend extends beyond transpacific routes. The WCI’s Shanghai-Rotterdam leg climbed by 10%, reaching $8,056 per 40ft, and the XSI’s Far East-North Europe rate also increased, reaching $7,897 per 40ft.
Challenges and the Need for Real-Time Data
In the face of soaring demand and limited space, many Beneficial Cargo Owners (BCOs) and Logistics Service Providers (LSPs) are paying premiums well above indexed rates to secure container space. This is impacting even the largest shippers on Asia-Europe routes, despite their substantial contracted volumes.
European freight forwarders have reported that major shippers are now required to pay additional surcharges to guarantee space for their shipments. “Importers and large BCOs are starting to feel the pinch as space becomes scarcer,” noted one forwarder. “Even carriers maintaining full volume commitments are operating at 30% to 40% reduced space. By mid-July, retailers on contracts are facing $3,000-$4,000 surcharges on some of their shipments to get them onboard.”
This situation underscores the critical importance of implementing visibility supply chain software. With real-time data insights, BCOs and LSPs can make informed, strategic decisions to manage the impacts on their supply chains more effectively. As the market tightens and rates rise, access to timely information on shipment status and market trends becomes crucial.
Market Outlook and Strategic Planning
Industry experts widely agree that the current elevated rates will likely continue through China’s Golden Week holiday starting on 1 October, and potentially extend into the second quarter of next year. “Asia-North Europe spot rates have already surpassed $10,000 for many customers,” one analyst observed. “This trend is expected to persist until Golden Week as companies aim to avoid stock shortages for the holiday season and anticipate strong order volumes through the end of the year.”
If the peak season extends to Golden Week, there will be only a brief respite before the pre-Chinese New Year peak begins. Consequently, the market might not see a significant downturn until Q2 next year, even with additional capacity being added. Some analysts predict a further 50% increase in rates by Golden Week. “Demand in July and August is robust, and a ceiling of $15,000 is not out of the question,” one expert noted. “We are now booking four weeks in advance for some retailers, with the earliest available space around 9 August.”
The current surge in freight rates emphasises the unpredictable nature of global shipping and the essential need for advanced supply chain management tools. Adopting visibility supply chain software that provides real-time data insights is vital for BCOs and LSPs to navigate these challenging conditions. By utilising these insights, stakeholders can make critical business decisions, ensuring smoother operations and greater resilience in an ever-changing market landscape.