Ocean freight rates to remain elevated in the next 3 months

Ti Ocean Freight Rate survey captures industry’s views on the trajectory of sea freight rates in 3 months’ time. The preliminary survey results from December indicate that rates will remain elevated in the short term on 3 major trade lanes.

The monthly Ocean Freight Rate index tracks industry’s expectations for rates based on real time sentiment. On a scale where 50 = no change, it can be seen from the data below that sea freight rates are expected to increase significantly in the next 3 months on all 3 trade lanes:

  • For the Asia to North America West Coast trade lane, the monthly Index amounted to 68.2, having decreased by 0.3 points against the previous month’s score of 68.6.
  • For the Asia to Europe North West trade lane, the monthly Index amounted to 67.1, having increased by 0.1 points against the previous month’s score of 66.9.
  • For the Europe to US East Coast trade lane, the monthly Index amounted to 68.0, having increased by 0.1 points against the previous month’s score of 67.9.

The perfect storm of pent-up demand, shortage of capacity and labour as well as port congestion will continue to drive up ocean freight rates. In particular, North America’s import demand from Asia remains high, especially for goods that are being shipped by sea. Most households in the US are well positioned to increase their spending in the coming months, driving further import demand. Inventories of North American and European manufacturers and retailers are still at historic lows and their replenishment will continue to drive up rates in the short term.

With regards to port congestion there has been some action planned to try and ease congestion at US ports, with the Federal Maritime Commission (FMC) announcing the launch of six supply chain innovation teams. The FMC should examine shipping data and determine existing constraints to help the flow of cargo through the international supply chain. Nonetheless, it is still uncertain whether and to what extent the initiative will be successful at alleviating supply chain inefficiencies and US port congestion.

Overall, with little prospect of an improvement in capacity and congestion, the current elevated level of ocean freight rates is likely to stay in the short term. Shippers hoping for some much-needed rates relief will need to endure more months of challenging market conditions before an increase in supply capacity balances with the pent-up demand.

This Brief provides a snapshot of Ti’s latest coverage of freight rate developments. An extended coverage of the supply chain challenges highlighted above as well as the November survey results from Ti Ocean Freight Rate Survey are available in Ti’s Ocean Freight Rate Tracker Q4 2021.

Source: Transport Intelligence, December 15, 2021

Author: Violeta Keckarovska