Why Is Sea Freight Rising Out Of Season

The source of this round of "abnormal" price increases in shipping prices is still in the Red Sea.

The main reason is the shortage of shipping capacity caused by the detour in the Red Sea.

The actual situation shows that detours consume a lot of shipping capacity, especially on European routes. Even if new shipping capacity is added, it cannot meet demand, resulting in tight shipping capacity. June is not the traditional peak season for shipping. Will shipping costs continue to rise all the way, or even return to the market in 2021? The reason why this price increase is difficult to predict is that this is not a traditional market. Take the price increase in 2021 as an example. At that time, Americans were consuming at home, and demand was actually increasing.

As of June 6, according to data from Freightos, a global digital freight platform, freight rates from Asia to the West Coast and East Coast of the United States climbed to US$5,030/FEU and US$6,723/FEU, respectively, and freight rates to the Mediterranean route rose to about US$5,639/FEU, and freight rates to Northern Europe rose to US$5,021/FEU. Freight rates on all routes showed an upward trend.

About 12% of global cargo transportation passes through the Eurasian waterway formed by the Red Sea and the Suez Canal. This route is a "lifeline" for the global energy and material supply chain.

According to data from the Suez Canal Authority, in early April, the canal's transportation volume fell by 66% compared with the same period last year. Although bypassing the Cape of Good Hope increases the sailing distance by about 11,000 kilometers, extends the sailing time by 12 to 14 days, and increases fuel costs by about 40%, many shipping giants have changed routes to avoid war losses.