Ocean freight rates from China are once again surging as exporters front-load shipments for the holiday season battered by worries about U.S. tariff increases and prolonged Red Sea disruptions. The Shanghai Containerized Freight Index, a gauge of container shipping rates compiled by the Shanghai Shipping Exchange, climbed 12.6% to 3,044.77 in the week beginning on May 27. It was the first time since August 2022 that the indicator, which is published on a weekly basis, broke through the 3,000-point level. The growth momentum is set to continue as more exporters book slots on vessels bound for the U.S. and Europe, freight forwarders said. “Shippers could be facing months of very elevated rates and increased delays as higher demand combines with restricted capacity,” Judah Levine, head of research at Freightos, a global freight booking platform, said in a research note. “But the duration and scale of these disruptions and price spikes could be less severe than those unprecedented impacts seen during the pandemic.”
Chinese exporters, from garment makers to manufacturers of toys and festive lights, normally start shipping goods ordered by Western buyers for Christmas and the New Year from July. This year exporters started to panic after U.S. President Joe Biden announced in May that Washington will slap punitive tariffs on USD18 billion of Chinese goods including electric vehicles, battery parts and solar cells. The additional tariffs have not yet come into effect. The cost of shipping a 20-foot container from Shanghai to Europe currently stands at more than USD7,000, an increase of about USD1,000 from a month ago, according to Xiong Hao, Assistant General Manager at Shanghai Jump International Shipping. He added that there was a shortage of empty containers in Shanghai amid surging demand from exporters.
HSBC said in a research report that an exhaustion of inventories by U.S. retailers meant that they now had to rely on imports to meet consumer demand, driving demand for container transport. “Worries about an escalation of trade tensions between the U.S. and China prompted manufacturers to arrange shipments of finished goods as early as possible,” said Yan Jun, Senior Executive with Shanghai-based Jinghan Stainless Products, which makes and exports steel products. Red Sea disruptions, caused by attacks on ships by Yemen’s Houthi rebels, are also a major concern, as exporters scramble to process shipments sooner rather than later, he added.
Chinese exporters have witnessed a roller-coaster ride of ocean transport costs over the past four years. After China emerged from the first coronavirus lockdown in the second quarter of 2020, companies started manufacturing goods at full tilt to meet pent-up global demand, with the nation regaining its place as the world’s factory. In August 2021, a peak season for container freight from China bound for the U.S. and Europe ahead of the holiday season, slots were often fought over by dozens of exporters who were willing to pay as much as 10 times the normal rates to ship their cargo. In September 2022, prices of shipping containers from Shanghai to the U.S. plunged by nearly 90% from the peak. Ports in Shanghai handled 49.16 million 20-foot equivalent units in 2023, 3.9% higher year-on-year and up 13.5% from 2019, the South China Morning Post reports.
