Recent Surge in Trans-Pacific Freight Rates
Sea freight rates have surged for 12 consecutive weeks, with trans-Pacific freight rates recently surpassing $10,000 for the first time. This has put significant pressure on sellers, who are grappling with supply shortages and uncertain future freight rate trends. As one Amazon merchant stated, “We adjust prices weekly, feeling overwhelmed, but we have no choice but to increase them because we can’t reduce our shipping volume.”
Reasons for the Rise in Shipping Costs
1. Red Sea Conflict and Port Congestion: The ongoing conflict in the Red Sea has increased sailing times and distances, contributing to congestion at European and American ports. Shipping companies have responded by raising freight rates to cover these additional costs.
2. Early Shipments and Peak Season Effects: In anticipation of July e-commerce promotions, sellers have been shipping earlier, effectively moving the peak season to May.
3. Tariff Policies: Companies are increasing exports to avoid high tariffs expected to be implemented soon.
4. Container Shortages: Global port congestion and “scalping” behavior have exacerbated container shortages, driving up market prices.
In May, freight rates on the U.S. East Coast surged by $2,000 due to strike risks, while West Coast and European routes saw increases of $1,000-$1,200 per container. Rates for the U.S. West Coast reached $8,100-$8,400, and the East Coast hit $10,300-$10,400, marking the first time this route has surpassed $10,000.
Current Market Conditions
Recent disruptions, including activities by the Houthi armed group and U.S. tariff avoidance by importers, have led to unprecedented congestion at Asian ports. Maritime data shows over 2.4 million TEUs of vessels waiting in Asian waters, with Singapore experiencing a 22% increase in average unload volume from January to May.
U.S. importers are stockpiling Chinese goods, particularly steel and medical supplies, to preempt high tariffs set for August, further aggravating bottlenecks at Chinese ports. In May, container imports at the top ten U.S. ports increased by 12%, second only to the record levels seen at the start of 2023. As consumer spending remains robust and retailers continue to restock, port congestion and delays have worsened.
Future Freight Rate Trends
Given the current conditions, a short-term decline in shipping costs seems unlikely, with the upward trend expected to persist. However, experts believe that rates will not return to the extreme highs seen during the pandemic. The pandemic saw massive subsidies, severe dockworker shortages, and intense port congestion, all contributing to soaring freight rates. With changing consumption patterns in Europe and America, economic pressures, and differing global port and labor conditions, a repeat of the pandemic scenario is deemed unlikely.
Potential Stabilization
Despite the high rates, there is an expectation that some routes might see rate stabilization by mid-July due to the early arrival of the peak season and current demand trends. Sellers should brace for prolonged high freight rates and focus on optimizing supply chain management to mitigate logistics costs and risks effectively.
Stable Growth in China-U.S. Trade and the Launch of ZIM’s New Trans-Pacific Route in July
Stable Growth in China-U.S. Trade
According to the General Administration of Customs of China, the total trade value between China and the United States reached 1.87 trillion yuan in the first five months of 2024, reflecting a 2% year-on-year increase. China’s exports to the U.S. totaled 1.39 trillion yuan, up by 3.6%, with the trade surplus expanding by 7.2%.
Analysts from the Shanghai Shipping Exchange have highlighted that, despite the complexities in China-U.S. trade relations, the trade continues to exhibit stable growth. This ongoing stability is advantageous for the long-term health of the North American shipping market.
ZIM’s New Trans-Pacific Route in July
On July 3rd, ZIM Integrated Shipping Services launched the ZX2 route, providing trans-Pacific shipping services from Shanghai and Ningbo, China, to Los Angeles, USA. The journey from Ningbo to Los Angeles takes just 13 days and includes several service benefits:
• Dedicated Berths: The route includes dedicated berths at both the departure and destination ports.
• Simplified Import Procedures: The service allows for quick pickup without the need for appointments.
• Efficient Rail Connections: Enhanced rail connections facilitate rapid inland distribution within the United States.
• Dedicated Import Pickup Channels: This improves the efficiency of import pickups.
Additionally, ZIM is upgrading its West Coast route, ZEX, with the introduction of the “ZIM FALCON” on July 16th. The route will feature a new port rotation including Kaimei, Yantian, Los Angeles, and Kaimei.
Conclusion
Despite the ongoing rise in sea freight rates, which presents challenges for cross-border sellers, the stable growth in China-U.S. trade and the launch of new routes offer encouraging signs for the market. As the shipping industry adapts to these changes, more stable development is expected. Freight rates on some routes are anticipated to stabilize by mid-July. However, sellers should remain prepared for high freight rates in the long term and focus on optimizing their logistics strategies to manage costs effectively.
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