Industry Pulse: Ocean rates rise by double digits as peak season nears
•Ocean freight rates spiked across the board in the first three weeks of August, signaling the start of peak shipping season, according to data from the Freightos International Freight Index.
•Transpacific rates rose 14.13% to an average of $1,504 per twenty-foot container, compared to July’s average of $1,318. Rates from China to the East Coast also spiked by 9.65% to an average of $2,464 per TEU, up from $2,247 the previous month.
•Rates on the transpacific lane are 7.54% higher than they were in August 2016. The recent rise in rates is most notable when shipping to the East Coast, though, as prices rose on a year-over-year basis for the third consecutive month. As of August, shipping to the East Coast was 30.3% more expensive than in 2016.
The rise of freight rates in August is a familiar tale for shippers in the retail, food and manufacturing industries, which must deal with constrained carrier capacity as peak shopping season nears.
If all the shelves are to be stocked in time for the Black Friday and Christmas, products must begin their journey as early as August or September. In turn, ports and carriers expect high volumes, and anticipate these by raising their general rates through a peak season surcharge. The National Retail Federation justified this in July, predicting ports could record their highest volumes since 2000 this August.
July and August port volume data is not yet fully available, but early reports indicate the predictions may be overblown, as peak shipping season hasn’t fully arrived. In a live price alert e-mailed by Freightos, the team announced many carriers had slashed their peak surcharges in August.
“The first week of August saw a big hike in China-US container prices as peak season (seemed) to start with a General Rate Increase pushing prices up by ~$500,” the alert noted. “However, it looks like peak season isn’t really here yet. Since the beginning of the month, the GRI has been reduced by an average 30%, dropping prices by ~12% since it initially took effect.”
However, the rate cut is unlikely to last. “Prices will likely rise again in early September as seasonal rising demand and peak season surcharges are activated,” Freightos warned.
Although shippers are likely to breathe easy in the coming weeks due to a drop in surcharges, it’s also important to note rates are rising generally, anyway. Data from 2016’s peak season suggests rates are unlikely to decline again until February, 2018.