Transportation & Logistics Analysis

Ocean freight rates settle at high level

September 10 2021

August freight rates confirmed that rates have stabilized at high levels. Inflationary trends and the approach of the peak season mean that any downward movement is excluded during the next few weeks.

With Western demand still strong, logistics chains are still under strain. Rail alternatives to the Asia-Europe shipping routes are now saturated, with big hold-ups at the border between Kazakhstan and China and, in Europe, between Belarus and Poland. At the same time, air freight is again in high demand following a temporary lull in the early summer. This surge in demand has been created by a resurgence in Covid-19 cases, especially in China. 

These factors pushed up the average increase in FAK ocean freight rates in August on East-West routes, which further drove up the shipping companies' average rate mix. The astronomically high freight rates announced by some shipping companies at the end of July, which ranged from $17,000 to $20,000 bracket for a 40' HCD, are tending to disappear.The decision to stop all spot rate increases until February 2022, announced by CMA CGM on September 9, is symptomatic in this respect.

In economic terms, it is sometimes more profitable to bear the cost, even a heavy one, of holding stocks close to consumption centres than to risk a supply chain breakdown in the absence of alternative restocking options. We are clearly seeing a complete reorganisation of the supply chain fundamentals which have applied over the last 40 years. Barely anyone dares talk at the moment about zero stock and just in time delivery…

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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).