Within just four weeks, the freight rate for a 40-foot container has almost doubled - unbelievable, but true. We also had to break this news to our customers, which naturally makes for an extremely bad mood. But how can it be that prices have risen so dramatically in such a short space of time?
We recently reported on the attacks in the Suez Canal, which caused prices to rise sharply in December and January. However, the situation eased somewhat in the spring. Now, however, the trend of rising freight rates has become entrenched again.
1. high demand for containers:
The global economy is recovering after the pandemic. Demand for imported goods has risen sharply, particularly in Europe and North America. More online purchases lead to higher demand for containers for transportation.
2. logistical bottlenecks:
Ports are congested, such as the port of Gubr, with many ships waiting to be unloaded, causing delays. This congestion makes it difficult to reuse containers quickly, which drives up prices.
3rd Suez Canal crisis:
Attacks by Houthi rebels in the Red Sea have forced many ships to avoid the Suez Canal and take the longer route around the Cape of Good Hope. This route increases travel time and costs.
4. rising fuel and raw material costs:
As oil prices recover, operating costs for ships also increase. These additional costs are passed on to freight prices.
5. seasonal peak period:
Traditionally, there are seasonal peaks, such as preparations for the Christmas business. We are currently in the middle of such a peak period!
6. premium services:
To meet demand, transportation companies are now offering premium services for priority freight, which is driving prices even higher.
These factors have led to a sharp rise in freight costs. Spot rates (the prices for short-term bookings) have risen sharply. For example, rates from China to Northern Europe tripled in May, and rates from China to the US East Coast more than doubled. To meet demand, transportation companies are now offering premium services for priority freight, driving rates even higher.
Image source: Drewry - World Container Index, Freightos, Spielzeug International, Maersk, [New Zealand Ministry of Foreign]
For us at Kaiserberg, this means that we can unfortunately only quote our customers daily prices for freight. We also weigh up together whether partial shipment via air freight is feasible in certain situations.
The explosive rise in sea freight costs from China to Germany shows how fragile and vulnerable global supply chains are. Geopolitical tensions, high demand and logistical challenges can quickly lead to drastic price changes. It remains to be seen how the situation will develop and what measures can be taken to mitigate the impact on global trade.
