Capacity shortages will fuel rate increases

Date Added: 11 January 2024

Capacity shortages will fuel rate increases

Yesterday, we reported that Linerlytica believes that the diversions of container ships being put in place as a result of the problems in the Red Sea will result in an expected capacity shortfall of up to 40% for departures from Asia to Europe and the US East Coast in weeks 4 to 6, with freight rates expected to surge further over the coming weeks.

Others are now agreeing with that assertion as ships are filling up leave customers of the shipping lines with little choice but to pay premium rates, despite having long-term contracts in many cases.  

Davies Turner, with our portfolio of international container services suspects that rates platform Xeneta is correct to say that the Red Sea shipping crisis would get worse before it gets better, and shippers need to “get their act together quickly” to secure capacity in the run-up to Chinese New Year next month.  

In its latest analysis, Sea-Intelligence also warned that shippers exporting from Asia would have limited access to capacity in the coming weeks; and that reflects what we are increasingly seeing in the marketplace.

It said that in the Asia-North Europe trade, with some service departures being held back in Asia pending re-routing decisions, and some services arriving late into Asia, there is likely to be a significant shortfall in capacity in the middle weeks of January, with a steep capacity drop expected for the week commencing 22 January.

Xeneta also said that high demand for capacity meant shippers on long-term rate contracts were being forced onto the spot market by carriers pushing for higher rates.

The latest data from Xeneta shows ocean freight rates between the Far East and North Europe have increased 124% since mid-December, while rates into the Mediterranean are up 118%. Rates between the Far East and the US east coast increased by 45%.

In light of market conditions and the demand and supply imbalance being caused by the reaction of container shipping lines to events in the Red Sea, we expect the high rates to continue, but our customers can rest assured that we will not be taking this opportunity to undertake behaviour that would be unworthy of a supply chain business that has been trading for over 150 years based on mutual respect and long term partnerships with our clients.

We remain committed to helping clients manage this difficult situation and mitigate where possible additional costs incurred, as well as offering alternate shipping solutions such as our twice weekly China Express rail service, offering a direct service between rail hubs in China and our hubs in the UK. Our oceanfreight team will endeavour to keep in close contact with all clients to provide up-dates on specific movements.

For more information about the current situation in regards to the Red Sea, or to find out more about Davies Turner’s ocean freight forwarding and logistics services, please contact ocean@daviesturner.co.uk or visit the relevant pages of this website.