Consumer goods boom driving sea freight rates

Reuters report shows how global container shipping rates have surged to record levels due to spikes in restocking demand in the United States and Europe, container scarcity at export hubs, and changes in freight flows because of the coronavirus pandemic.

The Freightos Baltic Global Container Index (FBX), a weighted average of 12 major global container routes, rose to its highest historical level this week and up 30% since July.

The spike is driven by very high demand for container freight since July, driven by post-lockdown restocking, limited air-freight capacity, incremental demand for stay-home goods and PPE (personal protective equipment), and a severe shortage of containers.

The cost to ship a container from China to the U.S. East Coast, a key global retail market, was up 42% since July and a new record, with the West coast rate up nearly 50% over the same period.

The transpacific route from Asia to the U.S. has seen the strongest demand surge, with volumes growing by between 10% to 20% more than last year, but high demand is impacting all trade-lanes currently and that demand is expected to stay firm until the first quarter of 2021.

Aside from the restocking demand, container rates have also climbed on a surge in orders from firms that usually ship goods in the belly of passenger jets but now must use container ships because much of the global air fleet remains grounded, which means that a vast slice of air freight volume remains unavailable.

An uneven worldwide distribution of containers caused by disruptions to logistics channels because of coronavirus lockdowns has also boosted rates.

While sea freight rates are expected to stay high through the end of 2020, the evolving pandemic situation in major economies may abruptly change the trajectory of rates next year.

If the pandemic worsens and leads to stricter lockdowns and deeper recessions, consumers may cut spending as unemployment rises, reducing global container and air freight demand.

Metro are now intensely involved in negotiations with partner shipping lines considering all market conditions, the current situation and carrier bullish approach. We would encourage and recommend that you provide us with your 2021 forecasts now so that we can look to tie down a deal for 2021 that has a fixed validity and allows consistency in pricing and budgetary needs. Please call Ian Barnes and/ or Grant Liddell for latest market details and planning for The New Year.