As ocean freight container shipping spot rates soar, it’s crucial to understand what can be done to avoid reaching the pandemic peak levels. In this article, we’ll explore the actions shippers and carriers can take to manage the market effectively. As we move into July, the rates are on the rise again, inching closer to the dramatic levels seen during the Covid-19 pandemic. This leaves many to wonder: what needs to happen to prevent another surge?
The Current Scenario
Average spot rates from the Far East to North Europe have hit $7,897 per FEU, marking 53% of the way to the pandemic peak of $14,783 in January 2022. Trades from the Far East to the US East and West Coasts are at 72% and 79% of their early 2022 peaks, respectively. The Far East to US West Coast rate is up 366% since December, reaching $7,648, while the East Coast rate has surged 268% to $9,146.
While it’s not certain we’ll hit those pandemic peaks again, it can’t be ruled out. The actions of both shippers and carriers in the coming months will be crucial.
Shippers: Keep Calm and Plan Ahead
Shippers need to avoid the panic button. Earlier this year, the rush to frontload imports, especially into Europe, contributed to the market surge. By maintaining a level-headed approach, shippers can help stabilize demand.
– Diversify Supply Chains: If you have the option, consider importing from different regions like North America instead of solely relying on the Far East. This can help build resilience.
– Evaluate Inventory: Assess whether the inventory buildup from earlier this year meets your needs. If it does, you can afford to approach the coming months with more calmness.
Carriers: Addressing Congestion
Carriers need to focus on reducing port congestion. Singapore, the world’s largest transshipment hub, is experiencing significant disruption, with the congestion spreading to nearby Malaysian ports like Port Klang.
– Optimize Port Calls: Reducing stops at congested transshipment hubs can help. For instance, MSC’s Britannia service now bypasses Singapore, heading straight to Liverpool from China/Vietnam.
– Learn and Adapt: Hapag-Lloyd’s China-Germany service has limited port calls, which can help ease congestion. Carriers should continue to adapt their routes to mitigate bottlenecks.
The Bigger Picture
It’s a delicate balance. Carriers’ actions in the coming weeks could determine whether congestion—and thus spot rates—continues to rise or stabilizes. The response to current challenges, such as the conflict in the Red Sea and the ongoing port issues, will be pivotal.
Conclusion
Ultimately, both shippers and carriers have roles to play in preventing a repeat of the pandemic-level freight rates. By staying calm, diversifying supply chains, and optimizing operations, we can navigate these rough seas together.
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