China-US ocean freight rates remain high in April 2022
On April 14, data released by MarketplacePulse showed that container ocean freight rates on routes from China to the United States has exceeded $10,000 for nine consecutive months. Compared with the pre-pandemic period, the cost has increased nearly tenfold. While global supply chains have stabilized somewhat, the freight system is far from normal.
Specifically, the average price for a 40-foot container shipped from China to U.S. West Coast port has increased from $1,500 in early 2020 to more than $20,000 in September 2021 (the average price includes premiums and surcharges). By the end of 2021, the rate began to drop, but only to $15,000. As of now, ocean freight rates have remained at the $15,000 level, and prices to Europe, albeit lower, are trending similarly.
MarketplacePulse pointed that, port closures, labor shortages, typhoon outbreaks, demand imbalances and container shortages are reasons for sharp price increases, some of which have improved, but new problems are emerging.
Additionally, congestion and delays have resulted in doubling the time it takes for shipments to reach U.S. warehouses. Parts of the supply chain are also affected by increased fuel costs. It is unclear when prices will drop significantly, and it could take years for freight rates to return to pre-pandemic levels.
Why is it difficult for ocean freight rates to drop ?
Trans-Pacific container rates between China and the U.S. west coast and U.S. east coast have been falling steadily since January, according to a report by digital freight forwarding platform Shifl. Compared to January 2022, freight rates on the West Coast were down 52% in March 2022 and rates on the East Coast were down 50%.
Drewry’s World Container Index (March 31) showed that prices on the trans-Pacific route fell for the fifth week. Prices in Shanghai-Los Angeles fell 8% or $814 to $9,112 and Shanghai-New York fell 6% or $730 to $11,531 per FEU.
The congestion of the West Sea ports in the United States has eased, but now it is not only the Shanghai epidemic that is coming, the global supply chain will continue to be affected by the epidemic, and it will be difficult for sea freight to drop in the short term.
The container throughput of Shanghai Port has ranked first in the world for 12 consecutive years, and this lockdown will undoubtedly make the global supply chain even worse. This is sure to affect commodity availability, prices and choices around the world.
Affected by the closure and control of the epidemic in Shanghai, at least 477 cargo ships are currently congested at ports in eastern China waiting to enter customs, of which 222 bulk carriers are waiting to enter the port in Shanghai. There were 197 container ships loading or waiting to be loaded in berthing areas near Zhoushan, Shanghai and Ningbo, a 17% increase from a month ago.
That is to say, after the lockdown in Shanghai, the congestion of ships has expanded from the Shanghai port to nearby Ningbo and Zhoushan. Shippers are said to be desperately diverting ships to other ports to avoid the shock of a shortage of truckers and warehouse closures in Shanghai.
At this stage, the large-scale coverage of the epidemic in Shanghai has not only caused a shortage of takeaway couriers, but also an extreme shortage of Shanghai port workers. A shortage of workers has slowed the delivery of documents needed to unload the ship. Vessels carrying metals such as copper and iron ore have been stranded as trucks are unable to carry cargo from ports to processing plants.
Freight volumes at the Shanghai port have fallen by about a third since March 12, as shippers divert freight elsewhere.
In addition to the Shanghai epidemic, severe weather and regional conflicts are also to blame.
Last week, U.S. media reported that heavy snow, sleet and freezing rain were moving toward the U.S. Midwest, North and Plains. Currently, nine states from Montana to Iowa have issued winter storm warnings or snow weather warnings.
Affected by this, there may be a backlog of goods, and the shipper will have to divert the freight to other places, and the cost of goods delivery will also increase to a certain extent in the long run.
The existence of uncontrollable factors such as the epidemic seems to make it impossible for sea freight to recover to before the epidemic.
Ship merchants actions
Ports are congested and warehouse goods are piled up. In addition to sellers who are anxious and unable to deliver goods to buyers on time, ship merchants are the ones who are really anxious.
In order to solve the relevant problems, on April 12, the Ministry of Transport issued methods, requiring all efforts to ensure the smooth operation of Shanghai Port. The Shanghai Municipal Commission of Communications and Shanghai International Port Group are coordinating with international liner companies to ensure the arrangement of routes, flights and space at Shanghai Port, and avoiding arbitrarily reduce the number of incoming ships at Shanghai Port.
Also some voyages of Maersk, ONE and Yixing have begun to cancel the ship stop at Shanghai Port, and provide multi-modal transportation services such as “land to water” or railway. It is expected that other shipping companies will follow this method too.
In addition, due to truck transportation efficiency and port entry issues, some yards in Shanghai Port are under pressure. Shipping companies such as Maersk, Hapag-Lloyd, Mediterranean, CMA CGM, ONE and other shipping companies have successively announced that dangerous goods and reefer containers will be transferred to other ports for unloading, reminding customers Change destination.
Therefore, it is necessary for sellers with goods to pass through Shanghai Port to pay attention to the notice of the shipper and adjust their own cargo delivery plan in time to avoid unnecessary losses.
