AlwaysFree: Container Freight Rates Spike On High Demand, Supply Disruptions

Global container freight rates have spiked due to very high demand since July driven by post-lockdown restocking in the US and Europe, shipping industry sources said. At the same time, air-freight capacity is reduced, and container availability is limited at many export hubs. The coronavirus pandemic also alters freight flows which caused container supply disruptions.

The Freightos Baltic Global Container Index (FBX) hit a new record high of $2,359/FEU this week after soaring 30% from early July. The container shipping cost for the China-US East Coast route has surged by 42% from early July to break a new record high of $4,750 this week. Freight rates for the China-US West Coast route also increased by almost 50% since early July to $3,878. Meanwhile, the Harpex Shipping Index nearly doubled from July to a more than 12-year high at 947 points.

Industry sources said container demand had drastically increased in the transpacific route from Asia to the US. Container volumes in this route are estimated to have expanded by between 10% to 20% from a year earlier. The sources noted that other trade-lanes had also experienced increased demand.

Companies which usually ship goods via passenger jets are now using seaborne containers as the global air fleet remains grounded. At the same time, coronavirus lockdowns create an uneven worldwide distribution of containers which leads to logistic disruptions.

Market participants said container freight rates are expected to remain elevated through the Chinese New Year. However, there is a prospect that the trajectory would reverse if the new wave of the COVID-19 pandemic worsens and leads to stricter lockdowns and deeper recessions. Under such a scenario, consumers will likely cut spending and prompt purchase cancellations from US and European importers. Demand for containers may also quickly drop if countries manage to put the pandemic under control quickly. Under such a scenario, consumers are expected to spend more on services and travels rather than goods.

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