Transportation & Logistics Analysis

Freight rates go into overdrive in June

July 21 2021

Ocean freight rates continued to rise in June on all major routes. A soft landing is starting to look likely, however, in the summer.

Like excessive heat in spring, the month of June seems to have caused the last ramparts of reason in the container shipping market to melt away.

  • Spot rates are continuing to rise, particularly for voyages from China to Western markets.
  • The annual contract tender season has come to an end but shippers who signed contracts of this kind are struggling to find space on ships for their merchandise.
  • June marked a turning point for the preferential quarterly rates offered by the shipping companies to leading forwarders. Some companies have stopped offering "NAC Quarterly" rates, redirecting their leading clients to the spot market with its current ultra-high rates

A turning point in July?

As we stressed in our article on possible scenarios in the container shipping sector in the second half, July should nevertheless mark a turning point.

Faced with soaring freight rates which are threatening to damage the competitiveness of its production sector, China could be tempted to intervene through state-owned Cosco. A controlled reduction in freight rates on the company's part could enable the market to come to a soft landing, albeit with rates still at a high level, while, at the same time, enabling the company to win considerable additional market share.

Another possibility is that the current overheating of the market could be stopped by the American government which is also concerned about the competitiveness of its production sector. On July 9, President Biden presented a plan to improve the competitiveness of the American economy, which invited the Department of Transport to look at the way that demurrage and detention charges are applied with the different parties concerned. Three days later, the Federal Maritime Commission signed a memorandum of understanding with the Department of Justice. The aim was to reinforce the FMC's capacity to detect, process and sanction competition law violations and anti-competitive behaviour on the part of shipping operators.

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Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
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