Not the traditional peak season but the price, why the sea freight "abnormal"?

Some people say that the source of this round of "abnormal" price increases in shipping is still in the Red Sea.

In other words, the shortage of capacity caused by the Red Sea bypass is the main reason, and the replenishment of inventory on the US line and some early shipment factors provide support for the cargo volume, thus forming the real price increase. The surge in demand for South American lines and the fact that shipowners deliberately keep capacity short to maintain high prices are close to "conspiracy theories" that have little relevance to this round of price increases.

This round of abnormal market can be seen, "in the early days of the Red Sea, the market believes that the problem is not big." Roger said that many industry bodies at the time estimated that the European route could be two weeks late one way and a month late all the way, based on the calculation of capacity loss, the number of ships this year was sufficient.

But the problem is not so simple. "The reality is that detours consume a lot of capacity, especially on European routes, and even new capacity cannot meet demand, resulting in a strain on capacity." "Then the scope of the Red Sea crisis will become larger and the circumnavigation distance will become longer, which will require more ships to maintain capacity." Recently, European analysts have assessed that there is a capacity shortfall of about 5 percent in Europe."

June is not the traditional shipping season, whether sea freight will continue to rise all the way, and even return to the market in 2021, some people think that depends on two factors: first, the duration of the Red Sea bypass; Second, the confidence of U.S. importers in the economy and the extent and timing of their "restocking."

"The reason why this price increase is difficult to predict is that this is not a traditional market. Take the price increases in 2021, when Americans are spending at home and demand is really increasing." "The only thing that can be foreseen is that the impact of detour on the industry will only grow." The longer it goes, the greater the impact."

The phenomenon of port congestion caused by the epidemic has allowed the industry to call the skyrocketing sea freight in 2021 a "once-in-a-century" market, when the shipping price of a 40-foot container (FEU) from East Asia to the West of the United States rose from more than $1,000 in 2020 to more than $20,000 in August 2021. Since then, the shipping order has been normal, and the sea freight has returned to the normal fluctuation range.

However, in the non-traditional peak season of April and May this year, the price increase of the US line came "suddenly", "more than a month's time increased by more than 2,000 US dollars."

As of June 6, according to data from global digital freight platform Freightos, freight rates from Asia to the West and East coasts of the United States climbed to $5,030 /FEU and $6,723 /FEU, respectively, to the Mediterranean to about $5,639 /FEU, and to Northern Europe to $5,021 /FEU. All routes are showing an upward trend in freight rates.

The price increase was somewhat unexpected. Some believe that this round of global ocean freight price increase began in South America.

But some say that, in fact, this year's professional bodies in the market clearly underestimated the impact of the Red Sea bypass. The trigger for this round of global ocean freight price increases is actually the Red Sea circumnavigation caused by global capacity constraints, in this case, the arbitrary deployment of capacity will easily lead to short-term capacity loss in local markets, which will push up prices."

About 12% of the world's cargo passes through the Eurasian waterway, which is formed by the Red Sea and the Suez Canal. For the global energy and material supply chain, this route can be called a "lifeline".

According to the Suez Canal Authority, traffic through the canal fell 66 percent in early April compared with the same period last year. Although the circumnavigation of the Cape of Good Hope resulted in an increase of about 11,000 kilometers in sailing distance, an extension of 12 to 14 days in sailing time, and an increase of about 40% in fuel costs, many shipping giants changed their routes in order to avoid war losses.

Osama Rabie, chairman of the Suez Canal Authority, said that since November 2023, rising tensions in the Red Sea have forced nearly 3,395 ships to change course and sail to the Cape of Good Hope in South Africa instead of entering the Suez Canal.

As for the so-called "shipowners deliberately keep the shortage of capacity to maintain high prices" in the market, Roger's observation, he did not see such a case. In fact, according to his observation, when the Red Sea crisis broke out, a major European shipping company was the first to actively grab ships in the leasing market, because the company in the past few years in terms of new capacity is the least of all the big ship companies, so when the Red Sea crisis broke out, they were in a very passive position. By contrast, the other big European shipping company has invested the most capacity, so it can cope with the crisis more calmly.

"Shipping companies are not deliberately pushing up freight rates and hiding capacity. From a capacity point of view, data on how many ships are deployed on each route, what the lines are, and how idle the routes are are all publicly available and easy to find." Roger added that according to analysts, global idle capacity utilization is now less than 1 percent, compared with 10 percent at its peak. "As a result, the shipping companies are not taking up the capacity. In fact, there is not enough capacity now." "He said.

Looking ahead, Roger believes that if the restocking cycle happens to coincide seamlessly with the traditional US peak season, the wave could last until September.