Asia Ocean Insights
How shipping prices increased by 900% and what to expect on the road ahead
Since the outbreak of COVID 19 and in particular since Q3 of 2020, there has been a steady rise in ocean freight rates from China to Europe, culminating in an increase from USD 1500-2000/40ft to USD 10,000-15000/40ft today.
In the early stages of COVID-19 in 2020, carriers reduced capacity by introducing blank sailings. As time went on, the more serious issues came not from lack of space but the lack of empty containers in China to meet demand globally. Coupled with port congestion at T/S HUBS in Asia, which then spread to Europe and affected the UK and in particular the port of Felixstowe in Q4, has resulted in the Asia – Europe trade unable to meet demand.
This has affected airfreight pricing and services as well as rail services from China, with the latter now seriously impacted by a severe lack of equipment and wagons, and congestion at borders in both China and Europe.
Carriers are imposing further blank sailing programmes, which will see demand again outweigh supply. This will likely allow carriers to at least maintain their high freight rates.
BACKGROUND INFO: THE FACTS
Container production was down 40% H1 2020 vs. H1 2019. The decrease in container production, along with the unexpected recovery in demand, has led the global container availability to drop significantly.
Congestion, lower productivity at terminals and inland depots, with boxes being tied up for longer periods have also led to bottlenecks, exacerbated by 2nd and 3rd waves of COVID-19 in the US and EU, which is hampering the return of containers to Asia.
Currently, there are severe trucking shortages in China. Around Chinese New Year, the government has ordered that Chinese travellers must quarantine for 14 days when they reach home and a further 14 days upon return to their workplace. With a 7 day Lunar New Year holiday, and a lot of truckers having opted to go back home for Chinese New Year, the total period of absence could be up to 35 days.
Only 5-10% of truckers are expected to work over the next few weeks, with up to 20% expected to work in the Shanghai region.
In the run up to the Chinese New Year holiday, additional sailings were put in place from Asia to meet the growing demand, adding to increasing congestion at US ports. In turn, continued equipment shortages at every major port in East Asia now mean factories are struggling to find containers to ship their freight. This, in addition to the driver shortages, will cause delays for shipments out of Asia.
Chinese New Year and its related decrease in sailings are expected to bring some respite to US and other Western ports to work through the queued freight and return some of the empty containers.
As the ocean freight industry continues to battle the impact of COVID-19, the above-mentioned bottlenecks are expected to remain in place into Q2 of 2021 with the interest in airfreight growing as a result.
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