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‘No Quick Fix’ for Freight Rates, Project44 Warns

Ocean carrier schedule reliability continued to tumble through August, with delays of up to 30 days on the worst-hit China-European Union (EU) routes, and 21.94 days on the worst-hit China-U.S. West Coast routes, according to container tracking data from Project44, a specialist in real-time supply chain visibility.

“If current circumstances hold, we’re going to see many more empty shelves heading into the holiday shopping season and beyond,” Adam Compain, senior vice president of data insights at Project44, said.

At the same time, maritime short-term contract rates between carriers and beneficial cargo owners (BCOs) and freight forwarders have continued their multi-year rise across major trade lanes, with average China-EU container rates rising by triple digits year-over-year across major port pairs, reaching $12,977 per 40-foot containers or equivalent units (FEU) in August.

For China-U.S. West Coast routes, short-term contracted rates were up 102 percent year-over-year to $6,570 per FEU last month, according to Xeneta, an ocean and air freight rate benchmarking and market analytics platform.

“There’s no quick fix here,” Josh Brazil, vice president of data insights at Project44, said. “Unless demand drops significantly after the holiday rush, this could be a multi-year problem.”

However, some slowdown in rate hikes seems to be occurring. After 22 consecutive weeks of increases, Drewry’s World Container Index (WCI) composite index stopped rising last week.

Drewry’s composite WCI remained steady at $10,377.19 per FEU for the week ended Sept. 23, but was 299 percent higher than the same week in 2020. This comes following the announcement by CMA-CGM and Hapag-Lloyd to put a halt in increment of spot rates as container prices on most trade lanes are at record highs.

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Project44 said while many factors causing the delays are market and pandemic-driven, such as increased demand for consumer goods and pandemic-related bottlenecks, carriers are cashing in on record revenues at the expense of shippers and a global economy where rising prices are ringing inflation alarm bells.

“Shippers can no longer absorb the costs,” Brazil said. “Sustained astronomical shipping rates coupled with a delayed supply are already causing inflationary pressures in the broader economy.

Between August 2020 and August 2021, delays for containers moving between the Chinese port of Yantian and the West Coast U.S. port of Los Angeles increased from a monthly median of 2.46 days to 12.93 days. Over the same time, the monthly average market price for China-West Coast U.S. routes for a, FEU increased to $6,570 to $3,247.

In the same period, delays for containers moving between the Chinese port of Shanghai and the U.S. West Coast port of Long Beach decreased from a monthly median of 6.62 days to 4.92 days.

Delays for containers moving between Shanghai and the Netherlands’ Rotterdam port increased from a monthly median of 1.88 days to 15.19 days. Over the same time, the monthly average market price for China- EU routes for an FEU increased to $12,877 from $1,650.

Drewry reported that freight rates from New York to Rotterdam dropped 8 percent to $1,107 per FEU. Similarly, rates on Los Angeles to Shanghai and Shanghai to New York fell 3 percent and 2 percent to reach $1,404 and $15,849 per FEU, respectively.

Rates on Shanghai to Rotterdam, Rotterdam to Shanghai, Shanghai to Los Angeles and Rotterdam to New York remained stable at previous weeks level. Drewry expects rates to remain steady this week.