With ongoing delays at ports, non-stop demand for ocean freight from Asia to the United States, and a lack of shipping capacity, ocean shipping rates are on the rise again and transit times continue to be unstable.
A fall in shipping rates occurred at the beginning of November 2021 as the peak shopping season ended, and transpacific rates were more stable as the year ended. Unfortunately, this won’t last for long. Despite this end of the year stabilization, shipping rates remain extremely elevated and are at 8-9X the pre-pandemic norm.
The number of ships waiting at port has yet to abate, causing many carriers to cancel their West Coast services, and others to move their capacity to intra-Asia services instead.
So, what is on the horizon for ocean shipping rates as we begin the New Year? Let’s discuss.
Ocean Shipping Rate Increases and Delays
While major ocean trade lines remained stable in mid-December 2021, they are still extremely elevated as we begin 2022.
Chinese manufacturing is expected to slow significantly at the beginning of February as the Lunar New Year holiday begins, but shipping prices are expected to spike ahead of the holiday. Further disruptions
could occur if the new coronavirus variants continue to spread. If so, we might see a repeat of the delays and shutdowns that occurred last summer.
Consumer demand and port congestion are the main drivers for the sustained sky-high shipping rates.
In 2021, annual US ocean imports set a record, up more than 20% compared to imports in 2019. And this trend isn’t expected to let up any time soon as January volumes are set to increase ahead of the Lunar New Year.
Global Indexes Are Rising
While the historic rate boom is great for investors speculating on the shipping market, it spells bad news for cargo shippers.
Different shipping rate indexes may show slightly different projections, but they all paint a similar picture of the ocean freight market—one which features little relief from the ultrahigh shipping costs.
The Drewry World Container Index, a global composite of main shipping routes, rose 2.3% in one week in December 2021, up 170% year-over-year with 40-foot shipping containers now costing $9,262 to ship. This index hadn’t been this high since late October 2021.
A different freight index, the Shanghai Container Freight Index (SCFI), showed a higher spike for ocean carriers, rising 1.8% in mid-December 2021.
Easing the Port Congestion > New Harbor Tariffs Hit
No End in Sight
While ocean freight shippers are dealing with the shortage of empty containers in Asia, port congestion and canceled sailings continue to impede the return of containers from Europe and North America. To top it off, the ocean freight rates are not projected to come down anytime soon. With global indexes on the rise, we might have a repeat of the shipping chaos of 2021.
US exporters were hit particularly hard during the pandemic and struggled to get their goods shipped, as carriers prioritized sending empty shipping containers back to China. In response, the United States House of Representatives passed a reform to American shipping law—the first in more than twenty years. This reform aimed to help move US exports regardless of market conditions, as well as offer protection from unreasonable shipping charges.
Even if the goal to add an extra 3,500 shipping containers each week to the Ports of Los Angeles and Long Beach is realized, backlogs are unlikely to clear before 2023.
Many container lines have had great success and outstanding financial results due to the pandemic, but what happens as 2022 gains traction?
As 2021 ended, there were new orders for 229 container vessels with a total cargo capacity of 2.2 million twenty-foot equivalent units (TEU). But ships take years to build, so when this new capacity is ready to use in 2023 or 2024, there will be at least a 6% increase in shipping capacity after years of low deliveries.
It is projected that the future increase in ocean freight capacity will put downward pressure on these exorbitant shipping costs, but unfortunately, it likely won’t be enough to return freight rates to their pre-pandemic levels.
In the interim, freight rates may reach new heights thanks to the increase in demand and our already congested ocean freight system. Unfortunately, even if capacity constraints are eased, ocean freight rates may continue to remain higher than before the pandemic.
Since You’re Here > Supply Chain Chaos Could Last Into 2023
Does This Affect Being Able to Purchase a Shipping Container?
While we have seen a decrease in our 20-foot shipping containers, we are excited to announce that we will have more in stock very soon. But in the meantime, we have 40-foot shipping containers that are ready to modify, as well as a few specialty containers that are ready to purchase!
While global shipping congestion has affected us all, our modification team at A American Container is ready to help you design and build a shipping container storage solution to fit your specific needs.
Featured Image Courtesy of Port of Long Beach