Red Sea: Far East-US Spiraling Ocean Freight Rates Set for Decline

Spiraling ocean freight rates from the Far East to the United States, caused by the Red Sea crisis, may have peaked, with some relief on the horizon emerging for the shippers, according to the latest analysis from Xeneta, and ocean and air freight rate benchmarking and market analytics platform.

The latest data released by Xeneta indicates a peak may have been reached after spot rates from the Far East into the US declined slightly since the last round of General Rate Increases (GRIs) were implemented at the start of February.

Into the US East Coast, rates have fallen slightly from $6260 per FEU (40ft container) on 1 February to $6100 on 15 February. Rates into the West Coast have declined from $4730 per FEU to $4680 in the same period.

Xeneta calls upon more than 400 million crowdsourced data points and early indications suggest a further softening of the market in the next 10 days.

While a weakening market will be welcomed by US importers, the impact of the crisis is far from over with spot rates remaining 145% up into the US East Coast compared to 14 December and 185% into the US West Coast.

 “Unlike during Covid-19 when disruption continued to wreak havoc, shippers and carriers now know what they are dealing with in terms of ships being diverted around Africa to avoid the Suez Canal.

“Rates are still elevated so the impact of this crisis is far from over - and the situation can still change at any moment - but perhaps some semblance of order has been restored,” said Emily Stausbøll, Xeneta Market Analyst.

Next Few Weeks as the Crunch time for the Shipping Market

The TPM24 industry summit taking place in Long Beach California at the start of March will act as the starting gun for negotiations between ocean freight carriers and US shippers for new contracts, so the next few weeks are crunch time for the market, according to Xeneta.

“Carriers will be doing everything within their power to keep rates elevated for when they enter negotiations with US shippers for new contracts.

“However, Xeneta data suggests this will prove difficult and it is likely rates will decrease further in the next 10 days, as we have already seen happen on trades from the Far East into Europe.

“If carriers are looking for reasons for optimism, it may be found in the ending of Lunar New Year celebrations, which will see an increase in volumes out of the Far East and the potential for upward pressure on rates.

“Either way, the next few weeks is crunch time for both ocean freight carriers and shippers and could define their fortunes for the rest of 2024,” Stausbøll concluded.