Container rates have risen rapidly in recent months due to the Red Sea disruptions. Longer waits at ports and longer sailing distances are also contributing factors. The situation is so tense that Sea-Intelligence believes that some cargo rates on certain Asia-to-Europe routes may be as high as $20,000 per 40-foot shipping container. These prices were reached during the heights of the Covid-19 Pandemic.
In a note, Alan Murphy, CEO of Sea-Intelligence said that the easiest way to answer the question “How high can rates go?” is to refer to the highest level seen during pandemic. “This does not, however, account for the increased round Africa sailing distances which were not present during the pandemic.”
Drewry’s World Container Index calculated that the overall spot rate peaked at $10 377 per 40 foot equivalent unit (FEU), with the Shanghai to New York average reaching $16,138. The next month, the Shanghai-to-Rotterdam prices hit their own top at $14,807 per container, while FEUs on the Shanghai-to-Genoa route peaked at $13,765 on average. The public index is still based upon averages provided by forwarders and shippers, so it’s safe to assume that many individual rates for cargo shipments are higher.
Murphy says that if the rate per nautical mile reached pandemic levels, the spot rates for a container shipping from Shanghai to Rotterdam will be $18,900. The spot rates could increase to $21,600 per FEU if shipped from Shanghai Genoa.
Murphy calculated the number of U.S. Cents per FEU for each nautical mile (nm), which was traveled during the pandemic. This came down to 140 cents/FEU/nm for the Rotterdam route. However, the number was closer 160 cents/FEU/nm for the Genoa trade lanes.
“If we extrapolate this data as an indication of the high market rates that can be achieved based on the pandemic rise in rates, then we can apply the new (longer sailing distances) and calculate how high spot rates per [FEU] can go, if the crisis persists,” Murphy stated.
The U.S. Defense Intelligence Agency recently assessed the Red Sea ship diversions and found that the alternate shipping routes around Africa added approximately 11,000 nautical mile for each voyage as well as $1,000,000 in fuel costs.
The WCI, a measure of ocean spot rates along eight major trade routes, rose 2 percent on Thursday, to $4,801 for a 40-foot container. Since April 25, when spot rates averaged $2.706 per 40-foot container, prices have risen 77.4 percent.
These figures are even higher when containers originate from Shanghai. The average cost of a container from Shanghai to New York is $7,299, while the trip to Genoa is $6,862. A container from Shanghai to Rotterdam will cost $6,177, while cargo traveling the trans-Pacific Los Angeles route costs on average $6,032.
The Shanghai Containerized Freight Index also increased by 6.1 percent in a week, reaching 3,379 points on Friday, its highest level since August 2022. This index covers 13 trade routes out of the port which is the largest port in the world based on the 20-foot equivalent unit (TEU) handled.
In a blog post published on Friday, Xeneta stated that spot rates for major trades from the Far East would increase again on June 15 but at a slower pace than in May and early-June. Xeneta predicts that spot rates for major trades from the Far East will increase again on June 15, but at a less dramatic rate than in May and early June.
In a recent post, Xeneta’s chief analyst Peter Sand said: “Any sign that the growth in spot rates is slowing down will be welcomed by the shippers. However, this is a very challenging situation, and it is likely to continue to be so.” “The market is still growing and some shippers still face the prospect of being unable to ship containers under existing long-term agreements and having their cargo rolled.”
Sand said that the container ship ecosystem was “still at severe levels,” due to a combination of the Red Sea skirmish and the congestion in ports in the Mediterranean, Asia, and equipment shortages, as well as shippers’ front-loading of imports before the peak shipping season from August to October. He said that the current East Coast port negotiations are at a standstill will only increase the pressure.
Sand’s opinion differed slightly from Murphy’s. He said that it was “unlikely, but not impossible,” for spot rates to reach the levels seen in the Covid-19 pandemic. He also noted that current factors make it hard to predict the market accurately.
“For example, a potential truce between Israel & Hamas would change the entire picture if it helped to stop attacks on container vessels by Houthi militia & saw a large-scale re-entry of carriers into the Red Sea Region,” Sand said.