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  June 21st, 2024 | Written by

Ocean Freight Spot Rate Growth Slows, but Market Challenges Persist

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The rapid increase in ocean freight container shipping spot rates appears to be slowing, though the market remains highly challenging. According to the latest data from Xeneta, an ocean freight rate benchmarking and intelligence platform, spot rates on major trades from the Far East are set to rise again on June 15, but at a slower pace compared to the sharp increases seen in May and early June.

Read also: Freight Rates Are Ballooning to Pandemic Highs 

On June 15, average spot rates from the Far East to the US West Coast will rise by 4.8% to USD 6,178 per 40ft equivalent unit (FEU), a more modest increase compared to the 20% hike on June 1. Similarly, rates to the US East Coast will increase by 3.9% to USD 7,114 per FEU, following a 15% rise on June 1.

Peter Sand, Xeneta’s Chief Analyst, noted, “Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this remains an extremely challenging situation and it is likely to remain so. The market is still rising and some shippers are still facing the prospect of not being able to ship containers on existing long-term contracts and having their cargo rolled.”

From the Far East to North Europe, average spot rates are projected to increase by 10% on June 15 to USD 6,357 per FEU. Although this is less than the 20% jump on June 1, it remains a significant mid-month rise. Rates to the Mediterranean are set to increase by 7.2% on June 15 to USD 7,048 per FEU, compared to a 19% rise on June 1.

Sand emphasized the ongoing pressures in the market, noting that average spot rates from the Far East are up 276% to the US West Coast and 316% to North Europe compared to mid-December last year. Factors such as the conflict in the Red Sea, port congestion, equipment shortages, and shippers frontloading imports ahead of the Q3 peak season are all contributing to the strained conditions.

The potential breakdown of labor negotiations and threat of union action at US East Coast and Gulf Coast ports could further exacerbate the situation. Additionally, rising spot rates could impact inflation in the US and Europe if these costs are passed on to consumers.

While it is uncertain if spot rates will reach the levels seen during the Covid-19 pandemic, Sand pointed out that numerous factors, including a potential ceasefire between Israel and Hamas, could significantly alter the market landscape.

In summary, despite a slowdown in the rate of increase, the ocean freight container shipping market remains fraught with challenges, with continued upward pressure on spot rates and significant uncertainties ahead.