Supply Lines

The Shanghai Containerized Freight Index rose for an eighth straight week to 3,688 on Friday, the highest since July 2024. The Shanghai composite, a gauge of export rates for several destinations including the US and Europe, reached an all-time high of 5,110 in January 2022.

“Ocean rates have gone bananas,” Pete Mento, managing director of Baker Tilly’s global trade management services, wrote in a LinkedIn post this week. “While everyone has been staring at duty rates, ocean freight has apparently decided it would also like to participate in destroying your landed-cost model.”

Another recent indicator shows sharp increases, particularly for goods headed to the US. The Drewry World Container Index’s spot rate for a 40-foot container to Los Angeles from Shanghai jumped last week to $7,712, the highest since June 2022. This measure peaked at $12,424 in September 2021.

The Drewry rate to New York from Shanghai soared to a four-year high of $10,394, more than triple the level in mid-February, just before the US fighting in Iran started. The cost for this route topped $16,000 in September 2021.

Drewry noted that German port strikes could worsen cargo congestion in northern Europe.

The carriers are charging cargo owners extra fees to help cover the higher costs of the bunker fuel ships burn, given the energy shock from tighter supplies from the Persian Gulf. Adding to the pressures is capacity tightened by Mideast freight diversions and lingering delays at major ports in Asia.

“With bunker prices pushing fuel surcharges higher, surpassing the pandemic peak cannot be ruled out,” Peter Sand, chief analyst at Xeneta, wrote in a research note. “Carriers are seizing the opportunity while the market is hot.” 

According to a Kuehne+Nagel’s seaexplorer dashboard of port traffic, the waiting time outside Shanghai’s port is 4.65 days based on a seven-day rolling average, with some waits ranging from six to eight days and “limited improvement expected in the short term.”

Heavy disruptions are also reported at container terminals in Ningbo, China, with reports that vessel waiting times are running about four days.

Holiday Shutdown

But some traffic rerouted around southern Africa is starting to go through the Red Sea again, offering some hope of capacity relief. Sand said he expects “one more freight rate push at the start of October as shippers rush cargo out of Asia ahead of the Golden Week shutdown, before rates start to soften, or at least the pace of growth will slow.”

Maersk CEO Vincent Clerc said last month that the container market is underpinned by fundamental demand, rather than issues in the Red Sea and Strait of Hormuz. Disruptions to global supply chains are a permanent feature, he said.

That reality is among the reasons Maersk is ordering 26 huge container vessels, some of the largest in the Copenhagen-based carrier’s fleet. Each would be able to fit 18,600 standard 20-foot containers, with delivery scheduled for 2029 and 2030, it said on Friday.

The healthy demand is evident at the US’s two busiest ports. The Port of Los Angeles had its best three-month run on record in June, July and August as importers navigated changing tariff policies and extreme weather across the globe.

“What we’re hearing from the shipping lines and the shippers is that the next two to three months will continue to be as busy,” said Port of Long Beach CEO Noel Hacegaba in a Bloomberg TV interview Monday. “In fact, we’re looking at a very solid September and we expect that October is going to be another busy month.”

Whatever happens after that, he said, hinges on policymakers’ talks aimed at maintaining stability in US goods trade.

—Brendan Murray in London