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News & Press: International Trade News

Ocean freight costs climb to five-year high in ‘double whammy’ for international traders

30 June 2020   (0 Comments)
Posted by: William Barns-Graham
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ocean freight

Global sea freight rates have reached a five-year high as demand in Europe recovers from its pandemic low but global capacity remains constrained.

The price hikes – which usually coincide with periods of disruption for global trade – present traders with a “double whammy” of “higher pricing and harder circumstances”, a customs broker told the Daily Update today (30 June).

‘Higher and higher’

Asia-Europe prices in particular have climbed, with Shanghai-to-Rotterdam spot rates up by over a quarter year-on-year.

Not all routes have experienced price hikes, with major transatlantic lanes – including Rotterdam-to-New York – seeing a decline.

However, a composite World Container Index of eight major East-West trade routes – conducted by maritime analysis company Drewry – found global averages to be at their highest since 2015.

The index showed a 1% week-on-week and 39.3% year-on-year increase to an average price of $1885 for a 40ft container.

Drewry said this increase was due to “ongoing capacity reductions” which have “propelled spot rates higher and higher”.

Double whammy

Fluctuations in rates have “become the norm” in recent years, with prices often increasing when global trade is faced with disruption such as that posed by the coronavirus pandemic.

Kieron Beamish, air and sea director at George Baker Shipping, told the Daily Update that the price rises are “unwelcome” but are not the “biggest problem” for firms.

“The issue lies with the carriers’ space restrictions, sometimes in combination with tonnage being removed, which push the rates upwards,” he said.

He said this imposes an even “bigger hurdle” for importers as even those with larger volume contracts experience “booking obstructions”.

“It’s usually a double whammy of higher pricing and harder circumstances,” he added.

Key figures

The analysis reported in Lloyd’s Loading List yesterday (29 June) – found the following:

  • Shanghai to Rotterdam spot rates increased by 11% week-on-week and are 26% higher year-on-year
  • Shanghai to Genoa increased by 9% week-on-week and 25% year-on-year
  • Rotterdam to New York declined 5% week-on-week with the reverse route dropping 2%