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Jebel Ali Port. Photo: Novikov Aleksey/Shutterstock

Global Shipping Costs Creep Higher After 16-Month Freefall

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August 3, 2023

(Bloomberg) —

Spot rates for shipping containers jumped by the most in more than two years, a sign that a 16-month slump in ocean-freight costs that helped ease the sting of goods inflation is over.

The Drewry World Container Index composite increased 11.8% to $1,761 for a 40-foot container, the fourth straight advance and biggest week-on-week percentage gain since June 2021. The composite — which reflects short-term rates across eight trade routes connecting Asia, Europe and the US — had fallen in 15 of the 16 months through June.

The costs for shipping from Shanghai to Los Angeles reached $2,322 per 40-foot container unit, an 11.3% gain from the previous week and fifth straight increase, according to Drewry. From Shanghai to Rotterdam, the rate jumped 25% to $1,620, the most since January 2021.

Shipping rates jumped tenfold to record highs during the height of the pandemic as consumers loaded up on household items and Covid-19 led to clogged logistics networks. The costs to move containers have since returned to levels reached before the health crisis, weighed down recently by bloated inventories and subdued consumer spending.

Matson Inc., a Honolulu-base container carrier that runs an express service from China to the US and charges a premium for the faster route, earlier this week said retailers are continuing to manage inventories carefully amid weaker demand.

“Absent an economic ‘hard landing’ in the US, we continue to expect trade dynamics to gradually improve for the remainder of the year as the transpacific marketplace transitions to a more normalized level of consumer demand and retail inventory stocking levels,” Matson CEO Matt Cox said in a statement Aug. 1.

Matson shares this week reached the highest level since June 2022.

Last week, closely held French carrier CMA CGM SA laid out a gloomy outlook for the industry, especially on more established trade lanes. East-West shipping routes are “under more pressure and dropping faster than the North-South trade, which remains pretty dynamic,” CMA CGM Chief Finance Officer Ramon Fernandez told reporters.

On Friday, Copenhagen-based A.P. Moller-Maersk A/S, the world’s No. 2 container carrier, is scheduled to release an interim report for its second quarter results.

© 2023 Bloomberg L.P.

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