Key Factors Behind the Hike in Ocean Freight Rates

Key Factors Behind the Hike in Ocean Freight Rates

Ocean freight container spot rates have sharply risen on major global trades since May’s onset, leading to speculation of an early peak season in 2024. Emily Stausbøll, Senior Shipping Analyst at Xeneta, attributed this surge to several key factors:

1. Record Demand: Q1 2024 witnessed a remarkable 9.2% increase in demand compared to the previous year. 

2. Red Sea Crisis: Escalating tensions in the Red Sea are exacerbating pressure on shipping capacity. 

3. Lingering Pandemic Effects: The chaos of port congestion and capacity constraints from the Covid-19 pandemic continues to affect shipping operations. 

4. Frontloading Imports: Shippers are anticipating potential capacity squeezes during the Q3 peak season, prompting them to increase imports now, consequently driving up rates. 

5. Stable Long-term Rates: Despite the surge in spot rates, carriers have secured long-term contracts at lower rates, prioritizing volume assurance amidst market uncertainties.

Emily Stausbøll emphasized the impact of these factors and highlighted the market’s nervousness. Additionally, the fear of new black swan events, such as the ongoing Panama Canal restrictions and US-China trade tensions, further fuels the urgency to build up inventories.

Stausbøll advises shippers to understand their supply chains and assess risks to navigate this complex market effectively. 

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