Freight Rate Analysis

Last week, ocean spot rates surged to their highest levels of the year on major trade routes, although the rate of increase has slowed following sharp rises earlier in the month. There are indications that prices may have already peaked as daily rates have begun to decrease, and major carriers have not announced surcharge hikes for later this month or August on these routes.

Global monthly volumes exceeded pandemic-era records in May, and the National Retail Federation forecasts robust US ocean import volumes, anticipating strong consumer activity in Q4 despite potential spending pullbacks. If these imports indeed peak next month, the North American market could soon experience the most pressure on rates and logistics networks. 

Peak season pressures, which commenced earlier than usual this year, might also subside earlier than expected, potentially by September. Additional capacity in the transpacific, including new entrants by regional carriers, appears to be alleviating rate pressures. Some carriers are reportedly reducing rates to maintain vessel capacities. 

For European importers, peak season could conclude early as well. Utilization levels on the Asia-Europe routes have declined recently, exacerbated by diversions through the Red Sea resulting in longer transit times. High freight costs are pricing out some lower-margin shippers, thereby dampening demand. 

Intra-Asia trade pressures may also ease, despite volumes likely peaking, as significant congestion at destination hubs has yet to materialize from increased import activity. Reports of congestion at US ports are attributed to labor slowdowns around the July 4th holiday and impacts from Hurricane Beryl. 
While congestion remains a concern in Singapore, overall delays have diminished, with vessel wait times now under two days. Similarly, shorter wait times at Chinese hubs suggest a reduction in system-wide congestion and delays. 

However, potential disruptions from other factors persist. Severe weather off South Africa recently disrupted transit, while labor issues, such as potential strikes among port workers and rail employees, could further disrupt supply chains. 

In air cargo, robust e-commerce volumes continue to drive elevated rates to North America and Europe. Despite expectations of reduced air cargo demand in Q4 due to peak season ocean volume shifts, sustained e-commerce activity is likely to keep pressure on air cargo space and rates throughout the year. 

Ocean Rates - Freightos Baltic Index: 
Asia-US West Coast increased 2% to $8,101/FEU. 
Asia-US East Coast climbed 9% to $9,620/FEU. 
Asia-N. Europe increased 3% to $8,632/FEU. 
Asia-Mediterranean stayed level at $7,747/FEU. 

Air Rates - Freightos Air Index:

China – N. America weekly prices stayed level at $5.57/kg 
China – N. Europe weekly prices stayed level at $3.38/kg. 
N. Europe – N. America weekly prices fell 1% to $1.58/kg. 

For any questions reach out to an Allyn Expert today!

Contributor: Cali Benetis

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