Where global shipping rates are heading in 2024 if attacks in the Red Sea continue

March and April are critical months for shipping companies looking to secure annual freight contracts with shippers including the world’s largest retailers, but this year’s contracting season is becoming a holding pattern.

The $2,500 spread between spot market prices and long-term container freight contract rates from Asia to the U.S. West Coast has reached its highest level since September 2021, when the spread between short-term and long-term rates was $2,900.

This has caused shipowners to pause before signing on the dotted line. Shipping lines tried to sign at the higher spot rates caused by the Red Sea diversions, and shipowners waited for a sharper decline.

Ocean freight spot prices fell for a sixth straight week as the Shanghai Containerized Freight Index fell 6%. Shipping companies failed to push through a tariff increase in mid-March and expectations of a tariff increase in April are fading given weak demand.

Peter Sand, principal analyst at

Before the Red Sea surge, ocean freight rates and contracts – which boost profits for shipping companies such as Hapag-Lloyd and Maersk – had fallen as low as $1,342 for a 40-foot container in October. The impact of these lower freight rates was reflected in shipping lines’ fourth quarter earnings.

According to Christian Roeloffs, co-founder and CEO of container trading and leasing platform Container xChange, there is currently a significant mismatch in the market between the price expectations of buyers and sellers in a demand deficit environment. “There is a significant imbalance between supply and demand pricing expectations for containers,” Roeloffs said.

The current spot tariff environment is benefiting shippers.

“[Ocean] “Airlines are taking advantage of the opportunity to tap into this current market,” Sand said.

Ultimately, he says time is on their side.

“The freight forwarders are now much more comfortable and all contracts signed last year will expire by the end of April. So once they expire, shippers may have to ship all of the product on the spot market.” “No major shipper can go all-in on the spot market,” Sand said. “It’s definitely not the preferred option right now.”

Sand said shippers can control rates through contract term terms and by introducing renegotiation clauses.

“I think a lot of companies are trying to hold back on their decisions,” said Michael Aldwell, executive vice president of marine logistics at Kuehne+Nagel.

“Will the issue of traffic jams in the Red Sea still exist? How serious is this? Following the rise in short-term freight rates, do we expect rates to fall even further? As we get through the next three, four, five, six weeks, companies will.” “We’ll end up with more agreements, and I think that makes a lot of sense given all the uncertainty out there,” said Aldwell.

Outlook for the full year 2024 for shipping

Chris Rogers, head of supply chain research at S&P Global, said the disruptions currently facing the logistics world will continue for the rest of the year, but costs associated with shipping have not risen as much as spot rates did during The minus sea attacks and the drought in the Panama Canal led to the latest price turnaround.

“We continue to see these interest rates decline,” Rogers said. “It can stay like this for the rest of the year.

Vespucci CEO Lars Jensen said he expects the decline in spot interest rates to continue, but that rates will vary depending on global trade routes.

“There will be increases, particularly in contract rates from Asia to Europe and from Asia to the US East Coast, because we simply don’t have the Suez,” Jensen said. “We also have the problem with the Panama Canal. But I’m not so convinced that there will be dramatic increases in contract rates to the West Coast of the US.”

Zvi Schreiber, CEO of Freightos, a digital booking platform for international air and sea freight, said that while freight rates from Asia to the West Coast are lower than East Coast prices due to the shorter route, they are due to both geopolitics and climate change have shot up.

“The Suez diversions impact the entire network,” Schrieber said. “I think the Panama Canal is recovering now, but it is well below full capacity due to drought. They rely on rain there to fill the locks in that canal, so many importers would rather bring their goods to the Port of Long Beach where they don’t rely on the Panama Canal.”

In general, West Coast ports experienced an increase in volume due to various issues, including the Panama Canal. The Port of Los Angeles announced a 60% year-over-year increase in container throughput for February. It was the seventh straight month of year-over-year growth at the country’s busiest port. For the two months ending in 2024, the port recorded a 35% increase over the same period compared to 2023.

Another headwind for East Coast ports is a possible dock workers’ strike in the fall.

“Buyers expect price cuts in the coming weeks, while sellers are holding back inventory as they expect stable prices due to tight capacity,” Roeloffs said.

Red Sea diversions and a highly unbalanced trading environment are exacerbating problems in the container market, Roeloffs said, pointing to China-Russia trade as an example. Chinese exports to Russia rose 12.5% ​​year-on-year in the first two months of 2024, while imports rose 6.7%.

These growing trade imbalances are impacting the work required in the supply chain to reposition empty containers.

“We are seeing the need to move empty containers increasing by 20%,” said Alan Murphy, co-founder and CEO of Sea-Intelligence. “We are not yet seeing the impact because the repatriation of these empty containers has not yet begun. The question is, is this surplus of empty containers in Asia or is it stuck across North America or across Europe? If the transit times are longer.” You extend the supply chains and have more equipment tied up in this supply chain. So this could be a downstream consequence of the Red Sea crisis, which could drive prices up again.”

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