Freight prices continued to spike last month with analysts warning of an early ‘peak season’ for ocean shipping, as the Red Sea crisis continues to disrupt international supply chains.
The Freightos Global Container Index increased from just over US$2,500 per forty-foot equivalent unit (FEU) at the beginning of May to just over $4,000 per FEU as of 6 June.
Prices were up across most major routes. “Ocean peak season’s early arrival together with Red Sea diversions straining capacity and schedules continued to result in worsening congestion, equipment shortages and elevated prices this week”, said Freightos’ head of research, Judah Levine, in an email to customers.
“In the last few weeks this demand increase-supply decrease convergence has pushed ex-Asia rates back to or just above their early-year peaks when Lunar New Year demand combined with the first weeks of the Red Sea crisis.”
Although prices are reasonably level this week, Levine anticipated further increases across June driven by an early ‘peak season’ for freight and the ongoing Red Sea crisis.
Sea Freight
Diversions from the Suez Canal are continuing to hit capacity, as ports struggle to deal with the disruptions caused by ongoing attacks by Houthi rebels on commercial shipping.
Since Houthi rebels attacked shipping passing through the Suez late last year, most companies have re-routed vessels via the Cape of Good Hope, with the long journey increasing both prices and carbon emissions.
Fabio Santucci, president of MSC’s US operations, estimated that between 6% and 7% of global freight capacity is tied up by port congestion, as a result of ongoing disruption.
On 28 May, US Central Command reported the M/V Laax was attacked by the rebel group, with other near misses reported in recent weeks. No one was reported injured and the Laax continued safely on its journey.
Air Freight
The air cargo tracker WorldACD said that prices continued to surge across several key routes, driven in part by traders trying to avoid Red Sea-related disruption.
According to WorldACD’s market data, Middle East-to-Europe costs had more than doubled in May compared to last year’s figures, propping up an otherwise flat global market for air freight.
When will this end
There was disagreement among CEOs as to the long-term effects of the surge in prices for ocean-bound shipping.
Hapag-Lloyd CEO Rolf Habben Jansen told clients that the surge in prices was “unexpected” and doubted the surge would last long.
By comparison, earlier this week Maersk’s boss Vincent Clerc updated his firm’s financial guidance for the year, predicting higher earnings on the basis of growing port congestion and increased freight prices.
Clerc said: “The ongoing threats to commercial vessels in the Red Sea and growing supply chain bottlenecks indicate that this situation won’t improve soon. More capacity than expected will be needed to resolve these issues and stabilise the global supply chain.”