Are Asia-to-Europe Container Prices Headed to $20,000?
Container rates have been escalating rapidly in recent months among the continued Red Sea disruptions, lengthier sailing distances and longer waits at ports. But the situation is getting so dicey that one maritime trade advisory service, Sea-Intelligence, believes some current cargo prices on certain Asia-to-Europe trade lanes could hover around $20,000 per 40-foot container—levels that were achieved during the height of the Covid-19 pandemic.
“The easiest answer to ‘how high can rates go?’ would be to point to the maximum level seen during the pandemic,” said Alan Murphy, CEO of Sea-Intelligence, in the note. “This, however, does not account for the increased round-Africa sailing distances that weren’t present during the pandemic.”
More from Sourcing Journal
Drewry’s World Container Index (WCI) calculated that overall spot rates peaked at $10,377 per 40-foot equivalent unit (FEU) container in September 2021, with the Shanghai-to-New York average reaching $16,138. The next month, the Shanghai-to-Rotterdam prices hit their own top at $14,807 per container, while FEUs on the Shanghai-to-Genoa route peaked at $13,765 on average. But the public index is still based on averages provided by shippers and forwarders, so it can be presumed that many of the individual rates for cargo shipments were higher.
According to Murphy, if the rate paid per nautical mile sailed reaches pandemic levels, spot rates for a container shipped from Shanghai to Rotterdam would be $18,900 and would escalate as high as $21,600 per FEU from Shanghai to Genoa.
Murphy accounted for the longer sailing distances by calculating the number of U.S. cents per FEU per nautical mile (nm) traveled during the pandemic. For the Rotterdam route, this came down to 140 cents/FEU/nm, while this number was closer to 160 cents/FEU/nm on the Genoa trade lane.
“If we extrapolate the data as an indication of how high the market can indeed go based off the pandemic surge in rates, we can now apply the new (longer) sailing distances and calculate how high the spot rates per [FEU] could possibly go, if the current crisis persists,” Murphy said.
A recent assessment of the Red Sea vessel diversions by the U.S. Defense Intelligence Agency indicated that the alternate shipping routes around Africa add roughly 11,000 nautical miles for each voyage, as well as $1 million in fuel costs.
The WCI, which measures ocean spot freight rates across eight major trade lanes, ticked up 2 percent week over week on Thursday to $4,801 per 40-foot container. Since April 25, when the spot rates averaged $2,706 per container, prices have escalated 77.4 percent.