Logistics
Looking out for lower container rates
Container rates are rising significantly again, increasing the frustration among entrepreneurs. "When will the authorities step in to stop this theft?" one entrepreneur recently exclaimed. This reflects the frustration among entrepreneurs and their suspicion about how container prices are determined.
After the COVID-19 crisis, shipping companies' customers thought the worst was behind them. During the pandemic, the combination of high transport demand and significant disruptions in factories and supply chains led to an unprecedented increase in sea transport prices — and historically high profits for the shipping companies.
After the end of the pandemic, there was a significant decline. However, at the end of last year, a shift occurred as the Houthis, claiming to support Palestinians in Gaza, began shooting at ships using the Red Sea route between Asia and Europe. Since then, the majority of container shipping companies have avoided the Suez Canal route, instead sailing around the Cape of Good Hope, a journey that is 11,000 kilometers longer.
This has far greater implications than initially thought. The so-called spot price for container shipping rose rapidly and, after a brief pause since the end of April, is picking up solidly again. The average price to have a 40-foot container transported was USD 5900 on 11 July, according to research firm Drewry. That is an increase of 116% compared to the end of April this year.
This increase is due to several factors. Shipping companies have to deploy more capacity to maintain sailing frequency on routes. In addition, more cargo is transferred to smaller vessels, which carry the containers further. Combined with increased transport demand, this in turn causes congestion at ports.
According to Drewry, the dwell time of large container ships in ports was 1.7 days in May this year, 41% longer than in January. The waiting time to enter busy ports increased by 43%.
Despite the sharp increase in tariffs, the situation is not yet as bad as during the pandemic, when container transport was at least twice as expensive. In theory, moreover, there should be a drop in the second half of this year as substantially more new ships come on stream.
But uncertainty looms large for entrepreneurs. The course of the unrest on the Red Sea cannot be predicted. Therefore, the second half of 2024 promises to be exciting. These days, estimating container rates is as difficult as that of interest rates. And companies have a hard time getting used to that.
Source: FD
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