What Are Current and Historical Ocean Freight Rates? [What + How]
Ocean Freight Rates | 4 MIN READ
As a leading producer of manufactured polyester yarn that is used in applications ranging from tire cord to airbags, to marine rope and more, the question of what current ocean freight rates are is part of most conversations with current and prospective customers. How do these rates compare to historical rates? Ocean freight rates remain at historical highs, but what is the source of such inflated rates? This article will answer these questions and serve as a resource on the topic to assist you in planning for the near future.
Explaining the process of ocean freight is quite complicated but allow me to try and compare it to the popular game of Tetris. If you step back and look at the global supply chain, it’s an ongoing challenge to get pieces of the puzzle to ‘fit’ together to create harmony throughout the supply chain. What is happening now versus in the past is why we are seeing a multitude of issues affecting how people are shipping goods across the ocean.
Unfortunately, we have several pieces of the puzzle that aren’t in harmony and not ‘fitting’ together so there is an imbalance across the supply chain affecting the cost of every container shipped.
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Challenges to Ocean Freight Rate Stability
Ocean freight pricing is being affected by several factors. From longer shipping routes to supply and demand issues, let’s break down the most prevalent reasons ocean shipping rates are currently so unstable.
The stability (or instability) of trade routes from Asia to the East Coast/Gulf region in the USA has created a ripple effect on the balance of containers and the positioning of these containers.
- More and more containers are being shipped to the West Coast of the USA to avoid the dangerous trade routes of having to go through the Suez Canal and the potential targeting of boats by Houthis.
- This increase in containers to the West Coast has now created longer dwell times for containers arriving to the West Coast and having to be shipped via rail to the East Coast.
- These longer dwell times have slowed the turnover of containers and their ability to be returned to circulation and used for shipping elsewhere. This creates a shipping container supply shortage, driving prices higher.
The announcement of increased tariffs from China to the USA has created a surge of demand for products to be shipped out of China
- The world container index increased another 12% last week and has increased 181% when compared to the same week in 2023
- More demand for container space has created a spike in pricing
- This demand comes at a time when carriers typically institute a PSS (peak season surcharge)
- Carriers are moving ahead with their latest proposed increases to the spot market on 6/15. As previously discussed, expect $1000-1200/40′ increases. Carriers have also announced GRI/PSS every two weeks through July as well ranging from $1000-2000/40′. We expect the same GRI/PSS announcements for August as well.Â
Labor contracts expiring in 2024 have put additional stress on the overall system as the uncertainty of being able to get goods into ports along the East Coast and Gulf Coast is uncertain currently until we get notification of a ratified agreement amongst the unions representing the local port employees and the respective ports.
As you can see, with all these recent changes in the global supply chain, the traditional process of securing ocean freight rates and the current process are quite different.
Traditionally Securing Ocean Freight Rates:
Typically, once a year, companies who export material sit down with shipping companies and negotiate a contract. In that contract, the exporter promises a certain number of containers each week of business to the carrier and in return, the carrier is promising stable pricing for the entire year to create a win-win situation for both entities.
Most companies experience volatility in the order patterns so each carrier offers up ‘spot’ business on a given boat, allowing companies to gain additional slots but at an additional cost to their contract pricing due to the forecasted demand.
Current State of Securing Ocean Freight Rates:
We are seeing carriers come back to companies who have contracts in place and claim that due to market volatility, they are going to ‘bump’ (delay) contract slots to later weeks to secure more business for the carrier on the open market which comes at a vastly higher price.
In the spot market, the pricing is so volatile now that it seems every week companies are getting updated on what the newest/latest price is going to be to ship to USA and Europe from Asia.
We are seeing more PSS (peak season surcharges) occur over the last 6 weeks than normal and there doesn’t seem to be a slowing down of these surcharges due to the increased demand for space on carriers over the last 6 weeks
These trends are expected to continue until at least October per the industry experts based on all the data they are analyzing.
It is a very challenging time in the prediction of ocean freight rates for the foreseeable future. As previously stated, the industry is being informed that this challenging time won’t revert to a more normal process until October – and that’s the earliest. Â
If you have other questions that are specific to ocean freight rates and what to expect in the future for industrial polyester and polyamide shipments, reach out to us at Hailide America for additional context and insight.