Spiking container spot rates show no sign of easing as carriers get set to implement a round of June freight rate increases.

Strong demand is reflected in a 12.6% jump in the Shanghai Containerized Freight Index to 3,044 on 31 May — a level only surpassed during the pandemic from May 2021 and August 2022.

A cocktail of unseasonably high demand, equipment shortages and the ongoing effect of Red Sea diversions pushed freight rates higher over the past week.

And spot rates are expected to continue rising next week due to general rate increases and surcharges timed to coincide with the onset of the early peak season.

Such increases show carriers do not expect demand to ease or conditions to improve in the short term, said Judah Levine, head of research at Freightos.

French carrier CMA CGM has set Asia North America rates at $6,000 per 40-foot equivalent unit from 1 June. Hapag-Lloyd has announced an Asia-North America peak season surcharge of $600 per feu at the start of June that will climb to $2,000 per feu mid-month.

Hot summer

Spot rates in June are, therefore, expected to exceed levels seen at the height of the Red Sea crisis.

Xeneta chief analyst Peter Sand. Photo: Xeneta

“On 1 June, spot rates will reach a level we haven’t seen since 2022 when the Covid-19 pandemic was still wreaking chaos across ocean freight supply chains,” said Peter Sand, chief analyst at ocean freight benchmarking Xeneta.

“However, it is the speed and magnitude of this recent spike that has taken the market by surprise — including the CEOs of the world’s biggest ocean freight liner companies,” he said.

Spot rates from Asia to the US West Coast are expected to reach $5,170 per feu on 1 June, he noted.

That marks a 57% rise during May and would surpass the Red Sea crisis peak of $4,820 per feu seen on 1 February.

Rates on other major east-west trades from Asia to the US East Coast, North Europe and the Mediterranean are also up by an average of 50% over the month.

Across the board

The spike in rates is partly powered by rising port congestion in both Asian and European ports as a result of diversions via the Cape of Good Hope route.

Such congestion “could end up supercharging Asia-Europe spot freight rates to significantly higher levels than they already stand”, Maritime Strategies International noted.

“Ocean freight carriers have tried to remedy the diversions in the Red Sea by increasing transshipments in the Western Mediterranean as well as in Asia, but this has led to severe port congestion in several hubs,” said Sand.

The rise in freight rates over the past week is evident as Drewry’s World Container Index surged by approximately 4% to reach $4,226 per feu by 30 May.

The World Container Index is 151% higher than the same week last year and around 200% higher than average pre-pandemic rates.

Drewry too expects rates to continue rising next week due to the early peak season.

Similarly, the Freightos Baltic Index stood at $3,494 per feu on 30 May, which is higher than the peak it hit in February.

Christmas already?

Those rises reflect the unexpected increase in demand.

Sand said that some businesses were already shipping cargo for the Christmas period in May.

“The early arrival of peak season is adding to the cocktail of uncertainty in the market,” he said.

“Back at the start of 2024, you could point to the Red Sea crisis as the root cause of spot rate increases, this time around it is far more nuanced.”

“While average spot rates will increase again on 1 June, the growth is not as rapid as it was during May, which may hint towards a slight easing in the situation,” Sand said.

“This cannot come soon enough for shippers who are already having their cargo rolled, even for containers being moved on long-term contracts signed only a matter of weeks ago.”

“Carriers will prioritise shippers paying the highest rates. That means cargo belonging to shippers paying lower rates on long-term contracts is at risk of being left at the port. It happened during the Covid-19 pandemic and it is happening again now.”

“Carriers will continue to push for higher and higher freight rates so the situation may get worse for shippers before it gets better.”