The price of a single container is US$54,000. Is shipping price going to rise again?

Seller A: The delivery fee has increased quite a lot in the past two days.

Seller B: That’s right. It was 3.47 before and now it’s 6.43.

Seller C: The price of the US line has also increased.

Over the past two years, freight prices have continued to rise due to the outbreak of the epidemic, port congestion, and supply-demand imbalance. Recently, the conflict between Russia and Ukraine has had a severe impact on the global supply chain. In addition to many sellers reporting that the recent increase in delivery fees is abnormal, some sellers also said that the price of ocean freight has also been soaring, and some freight forwarders even said that the price of the US route will rise again in March.

Or increase 20-40 times, shipping prices continue to rise

As the conflict between Russia and Ukraine has not eased, multiple factors have led to a significant reduction in the supply of shipping container ships. At the same time, oil prices are also rising. Shipping companies are trying to reduce costs by levying emergency fuel surcharges, while freight companies are raising prices to ease fuel surcharges . This has led to a continuous increase in shipping costs.

A company has made a forecast based on the recent shipping prices from China to North America, Northern Europe, the Mediterranean and other routes, indicating that in some cases, shipping costs will increase by 20 to 40 times in the future.

At the same time, five global shipping giants, including Maersk, Hapag-Lloyd and Mediterranean Shipping, have successively issued relevant notices to suspend accepting orders from Russia and stated that they will continue to expand the scope of suspension of business, which has already affected the shipping business. Relevant data shows that the total shipping capacity of these five companies accounts for about 60% of the global market . The suspension of order services will aggravate the plight of the supply chain and make the already difficult shipping market even worse.

According to data from two years ago, the sea freight from Shanghai to Rotterdam was less than US$2,000. However, after the outbreak of the Russia-Ukraine conflict, the freight rate for a single container of some freight forwarders has soared to US$54,000, an increase of more than 20 times. It is expected that prices will continue to rise in the future.

Some industry insiders predict that the freight rate per FEU on the China-US route may rise, with the expected increase being 2 or 3 times the current level, which means that each 40-foot container will increase from US$10,000 to US$30,000.

In addition, according to an overseas analysis, due to multiple reasons such as continued congestion, the long-term contract price for eastbound cargoes in the trans-Pacific region in 2022 will increase significantly compared with the service contracts signed in previous years. Data shows that the average long-term contract price for the West Coast signed in the past three months is US$6,548/FEU, and the average price for the East Coast is US$10,100 / FEU, which is mainly due to the risks of congestion on the West Coast.

Average contract freight rates from Asia to the United States are also increasing. Based on data from December 1 to February 2021, the average contract freight rate from Asia to the United States within 3 to 12 months increased by 125% compared with the same period last year, and the contract freight rate on the East Coast increased by 160% compared with the same period last year.

Factors such as insufficient supply and war have caused ports in some regions to shut down and some shipping routes to be blocked. In view of this situation, many people in the industry are pessimistic about freight rates, saying that an increase is inevitable, but some people in the industry say otherwise.

Three major shipping giants are under investigation. Is it expected that shipping costs will drop?

"The epidemic, the Russian-Ukrainian incident, plus the shipping costs, as a humble foreign trade person, I haven't felt this desperate for a long time..."

"Shipping costs are ridiculous. Not only do we not make any money, we even have to pay for it!"

"I worked so hard, but now I see that the profit is only 25 cents? The shipping cost has been rising again and again, and there is not even 25 cents left!"

…

According to the current trend and multiple forecasts, if shipping costs continue to rise in the next period of time, it means that sellers' costs will increase further and their profits will continue to be squeezed. If profits cannot offset expenses, some sellers may choose to flee the cross-border e-commerce circle.

In response to this situation, Biden said he would focus on fighting inflation, starting with shipping . The White House pointed out in the announcement that the world's three largest shipping company alliances ( 2M, THE Alliance, and Ocean Alliance) have almost monopolized the shipping channels, have the confidence and ability to manipulate prices, and have threatened the national security and economic competitiveness of the United States.

It is understood that the U.S. House of Representatives Committee officially launched a public investigation into price fraud by major global container liner companies on March 4, and has taken a firm stance against the profiteering behavior of shipping companies.

In response to the problem of excessively high freight rates, the U.S. House of Representatives last week slapped Denmark’s Maersk, France’s CMA CGM and Germany’s

Hapag-Lloyd's three major European carriers were listed as the first container shipping companies to be investigated.

It is reported that the US Congress has set up two oversight groups to investigate the three shipping giants, saying that the high freight rates charged by shipping companies to shippers are an important reason for exacerbating inflation. At present, the oversight groups have sent letters to the three shipping companies, asking them to provide information on freight rate increases and submit reports on the high ocean freight and surcharges collected in the past year.

This news has sparked heated discussions among industry insiders. One industry insider said, "This action should have been taken long ago, but we don't know whether the other party will cooperate in providing information. After all, this may not be beneficial to the shipping company itself." But overall, many cross-border sellers still have hope for this. If the shipping costs can be controlled within a reasonable range through this action, it can be said that it will solve a problem for sellers.

In addition to high freight prices, shipping capacity is also one of the complaints of many cross-border sellers. Lars Jensen, CEO and partner of Vespucci Maritime, said that due to the bottleneck of international trade, shipping capacity will continue to be in short supply. If the situation is optimistic, this situation will continue until the end of this year, but it is also possible that it will continue until next year.

Some U.S. retailers and other importers believe that if the number of new ships increases in 2023 or 2024, the supply and demand problem will be solved. However, some industry insiders believe that the IMO's 2023 decarbonization policy for greenhouse gas emissions will significantly increase shipowner costs and will also have a greater impact on some Panamax ships with smaller capacity. However, to a certain extent, adding additional loading ships cannot effectively alleviate the problem of capacity shortage in the Pacific region.

Many shipping companies and express delivery giants have suspended their logistics operations, which has a huge impact on the supply chain that is already under the influence of the epidemic. To a certain extent, the longer the Russian-Ukrainian conflict lasts, the greater the impact on import and export trade will be. Rising freight rates and unpredictable time delays are inevitable. It is still unknown how the shipping price will trend in the future, but cross-border sellers with shipping plans should be reminded to arrange shipments carefully and reasonably and prepare response plans in advance.

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