Transportation & Logistics Analysis

Ocean freight rates crept up again in January 2022

February 15 2022

Ocean freight rates increased slightly again in January before the Chinese New Year. Access to capacity and container availability are still the major problems.

For shippers, the months follow each other but look the same. The new year began with strong demand to secure long-term space aboard ships. Paradoxically, the shipping companies have been struggling to satisfy this demand, even though virtually the entire global container shipping fleet has now been brought into service. Containers ships barely 10 years old, which were set to be scrapped at the start of 2020, are now being fought over by customers ready to pay rates which were unthinkable just a few months ago, and the charter and newbuilding markets are fully booked for a long time to come.

At the same time, shippers are having problems getting access to containers, mainly in Asia. 

A slight improvement in quality of service

We saw a slight improvement in quality of service in January, but we are still a long way from a return to the clockwork regularity of service sought by the market. According to Sea Intelligence figures, the reliability rate of services fell from 78% in 2019 to 63.9% in 2020, and 35.8% in 2021.

The scenario we have already spoken about, according to which the shipping companies opt for a reduction in cargo volumes from one month to another, charging much higher rates but still keeping complete control of all available capacity, is turning out to be the right one. This comes down to providing floating storage more than regular line shipping services. The most unbelievable thing, however, is that, paradoxically, this almost suits some retailers, whose warehouses are already full of incoming goods. 

Price dynamics still favourable to companies

In December, freight rates continued to rise despite a slight fall in demand at the very end of the year. This upward trend continued in January on the main routes out of Asia, and on east-west transatlantic routes. This trend was favourable to the shipping companies as they try to persuade shippers to sign up to longer direct contracts.

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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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