Container rates have been escalating rapidly in recent months among the continued Red Sea disruptions, lengthier sailing distances and longer waits at ports. But the situation is getting so dicey that one maritime trade advisory service, Sea-Intelligence, believes some current cargo prices on certain Asia-to-Europe trade lanes could hover around $20,000 per 40-foot container—levels that were achieved during the height of the Covid-19 pandemic.
“The easiest answer to ‘how high can rates go?’ would be to point to the maximum level seen during the pandemic,” said Alan Murphy, CEO of Sea-Intelligence, in the note. “This, however, does not account for the increased round-Africa sailing distances that weren’t present during the pandemic.”
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Drewry’s World Container Index (WCI) calculated that overall spot rates peaked at $10,377 per 40-foot equivalent unit (FEU) container in September 2021, 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. But the public index is still based on averages provided by shippers and forwarders, so it can be presumed that many of the individual rates for cargo shipments were higher.
According to Murphy, if the rate paid per nautical mile sailed reaches pandemic levels, spot rates for a container shipped from Shanghai to Rotterdam would be $18,900 and would escalate as high as $21,600 per FEU from Shanghai to Genoa.
Murphy accounted for the longer sailing distances by calculating the number of U.S. cents per FEU per nautical mile (nm) traveled during the pandemic. For the Rotterdam route, this came down to 140 cents/FEU/nm, while this number was closer to 160 cents/FEU/nm on the Genoa trade lane.
“If we extrapolate the data as an indication of how high the market can indeed go based off the pandemic surge in rates, we can now apply the new (longer) sailing distances and calculate how high the spot rates per [FEU] could possibly go, if the current crisis persists,” Murphy said.
A recent assessment of the Red Sea vessel diversions by the U.S. Defense Intelligence Agency indicated that the alternate shipping routes around Africa add roughly 11,000 nautical miles for each voyage, as well as $1 million in fuel costs.
The WCI, which measures ocean spot freight rates across eight major trade lanes, ticked up 2 percent week over week on Thursday to $4,801 per 40-foot container. Since April 25, when the spot rates averaged $2,706 per container, prices have escalated 77.4 percent.
But those figures skew even higher for containers across the four trade lanes originating out of Shanghai. A container from Shanghai to New York costs $7,299 on average, while the trek to Genoa costs $6,862. A trip from Shanghai to Rotterdam costs $6,177 per container, while the price of cargo to voyage the trans-Pacific Los Angeles lane was $6,032 on average.
Similarly, the Shanghai Containerized Freight Index has increased 6.1 percent week-over-week as of Friday to 3,379 points, its highest total since August 2022. This index covers 13 trade lanes out of the port, which is the largest in the world by 20-foot equivalent units (TEUs) handled.
In a Friday blog post, Xeneta indicated spot rates on major trades out of the Far East will increase again on June 15, but to a less dramatic extent than witnessed in May and early June. Similar to the WCI data, Xeneta is calling for average spot rates from the Far East to the U.S. West Coast to increase by 4.8 percent on Saturday $6,178 per 40-foot container.
“Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this is an extremely challenging situation and it is likely to remain so,” said Peter Sand, Xeneta chief analyst, in the post. “The market is still rising and some shippers are still facing the prospect of not being able to ship containers on existing long-term contracts and having their cargo rolled.”
Sand noted that pressure within the container shipping ecosystem is “still at severe levels” due to the combination of the Red Sea skirmish, the congestion at ports in the Mediterranean and Asia, as well as equipment shortages and shippers front-loading imports ahead of the August-to-October peak shipping season. He said the current East Coast and Gulf Coast port negotiations, which are now at a standstill, will only add to the pressure.
Sand’s opinion slightly differed from Murphy’s, saying it was “unlikely—but not impossible—that spot rates will reach the levels seen during the Covid-19 pandemic,” noting that the current factors make it difficult to predict the market with any degree of certainty.
“For example, any potential ceasefire between Israel and Hamas could change the picture completely if it helps to end attacks on container ships by Houthi militia and see a large-scale return of carriers to the Red Sea region,” Sand said.
