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Ocean freight rate pass Red Sea crisis peak; hit levels not seen since Covid-19

The U-Freight Group, as a provider of international container shipping services, including LCL and FCL import and export operations, notes that the latest data released by Renata indicates that ocean freight container shipping spot rates are set to exceed the level seen at the height of the Red Sea crisis as the latest round of increases hit the market at the start of this month.

Peter Sand, Xeneta Chief Analyst, said: “The ocean freight container shipping market has seen rapid and dramatic increases during May and that is set to continue with further growth in spot rates.

“On 1 June, spot rates reached a level we haven’t seen since 2022 when the Covid-19 pandemic was still wreaking chaos across ocean freight supply chains.

“There is a cocktail of uncertainty and disruption across global ocean freight supply chains at present and this is fuelling the spot rate increases. However, it is the speed and magnitude of this recent spike that has taken the market by surprise – including the CEOs of the world’s biggest ocean freight liner companies.

“Importers have learned lessons from the pandemic and the most straightforward way to protect supply chains is to ship as many of your goods as you can as quickly as possible. That is what we are seeing with some businesses telling us they are already shipping cargo for the Christmas period in May.

"The early arrival of peak season is adding to the cocktail of uncertainty in the market. Back at the start of 2024 you could point to the Red Sea crisis as the root cause of spot rate increases, this time around it is far more nuanced.

“Ocean freight carriers have tried to remedy the diversions in the Red Sea by increasing transshipments in the Western Mediterranean as well as in Asia, but this has led to severe port congestion in several hubs.

“Carriers have tried to re-align capacity from other major trades to cope with longer sailing distances around the Cape of Good Hope on services from the Far East to Europe and US East Coast, but this has contributed to rates increasing on trades such as the Transpacific, which do not transit the Suez Canal.

“Everywhere you look there are knock-on impacts and unintended consequences which only serves to fan the flames of uncertainty across the ocean freight container shipping industry.”

While the latest spot rate increases is further bad news for shippers, Sand believes there is some cause for optimism.

He said: “While average spot rates will increase again on 1 June, the growth is not as rapid as it was during May, which may hint towards a slight easing in the situation.

“This cannot come soon enough for shippers who are already having their cargo rolled, even for containers being moved on long term contracts signed only a matter of weeks ago.

“Carriers will prioritize shippers paying the highest rates. That means cargo belonging to shippers paying lower rates on long term contracts is at risk of being left at the port. It happened during the Covid-19 pandemic and it is happening again now.

“We are also seeing freight forwarders being hit with new surcharges and being pushed onto premium services to have space guaranteed onboard ships. In such cases they have no other option than to pass these costs on directly to their shipper customers.

“Carriers will continue to push for higher and higher freight rates so the situation may get worse for shippers before it gets better.”

U-Freight remains committed to helping clients manage the difficult situations facing container shipping at present and mitigate where possible additional costs incurred. Our ocean freight team will endeavour to keep in close contact with all clients to provide updates on specific movements.

For more information about our ocean freight forwarding and logistics services, please visit the relevant pages of this website, or contact your local office, which can be seen here: