June 4, 2024 Update | Freightos

Weekly highlights

• Asia-US West Coast prices (FBX01 Weekly) increased 2% to $5,030/FEU.
• Asia-US East Coast prices (FBX03 Weekly) increased 6% to $6,724/FEU.
• Asia-N. Europe prices (FBX11 Weekly) increased 3% to $5,022/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) stayed level at $5,640/FEU.

• China – N. America weekly prices decreased 5% to $5.43/kg
• China – N. Europe weekly prices fell 4% to $3.87/kg. 
• N. Europe – N. America weekly prices fell 2% to $1.7/kg.

Analysis

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. 

Global congestion is estimated to be tying up about 7% of total capacity with the worst example currently in Singapore, where diversions have resulted in increased transhipment volumes for Middle East and Red Sea destinations or from intra-Asia containers as carriers omit other port calls to try and recover schedules. The port is reactivating an out of use terminal to increase capacity and help get to the more than forty vessels currently waiting as many as seven days for a berth. 

So far, hubs in North Europe and North America are not seeing Red Sea-driven vessel bunching or congestion, with the recent, but falling, backlogs at the ports of Savannah and Charleston attributed to slow downs from infrastructure projects and software problems.

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.  Though prices did not increase sharply last week and are level so far this week, additional, significant, early-June rate increases are anticipated.

With capacity and equipment scarce and spot rates now several thousand dollars above long-term contract levels, annual agreements are once again becoming unreliable. 

A recent Freightos Group survey of more than fifty logistics professionals found that since early May, nearly 70% of BCOs and forwarders with long term ocean contracts have had containers rolled or pushed to the spot market, or are facing contract renegotiations with carriers to increase their long term rate levels.

And there’s uncertainty as to how long this will last: Many (40%) think that the situation will improve within the next two months when peak demand could start to ease, while 26% expect these types of disruptions to last until the end of the typical peak season months in early Q4, and others think it could stretch longer. 

Air cargo demand remained strong in May, though the new round of ocean disruptions do not appear to be causing a new surge in air cargo volumes just yet. Freightos Air Index rates from China to N. America and Europe eased slightly and ex-South Asia rates were level to start June.  Middle East export rates however, rebounded 12-25% since late May, possibly reflecting some renewed sea-air demand due to worsening ocean conditions.

B2C e-commerce volumes from platforms like Temu and Shein have been the main driver of strong demand, tight capacity and elevated rates from China to N. America and Europe. But Temu will reportedly pull back from the US market, and now Shein is facing challenges there as well. 

In addition, the US Customs and Border Patrol have now increased reporting requirements and the rate of inspections for de minimis exemption imports. These steps reportedly led to congestion at LAX – a major hub for e-commerce imports from China – last week and canceled flights and shipments as exporters adjust to the new standards.