Freight Costs Surge Amid Unprecedented Supply Chain Volatility, Leaving Shippers and Forwarders Struggling

Managing freight expenses is the primary concern for shippers and forwarders as supply chain instability continues to drive up ocean rates. According to Xeneta’s mid-year ocean freight update, CEO and co-founder Patrik Berglund stated that carriers, who had anticipated significant financial losses in 2024, are now expecting full-year profits due to the soaring spot market, which seemed unlikely six months ago.

Xeneta's recent analysis highlights that the level of volatility in 2024 has exceeded previous expectations. The year began with a sharp increase in spot rates on major trade routes from the Far East, which then declined before rising again in May. This demonstrates that market fluctuations can still occur in both directions despite the ongoing Red Sea crisis.

The average spot rates on major fronthaul trades from Asia have increased by over 300% since December. A Xeneta poll revealed that 'managing freight spend' is the top concern for shippers and forwarders this year, with 46% identifying it as their primary challenge.

Peter Sand, Xeneta's chief analyst, emphasized the critical importance of managing freight expenses and the disruptions they may cause within maritime supply chains and logistics. Rising spot rates have also impacted contract rates, with a survey indicating that 74% of Xeneta customers experienced premium surcharges since the Red Sea crisis began.

Maersk CEO Vincent Clerc explained that one reason for temporarily higher freight rates is the increased charter costs for carriers. He noted that extended cargo journeys and reduced capacity have significantly raised container prices. Maersk has accepted these costs, acknowledging that many will persist beyond the current crisis, as carriers must commit to long-term charter agreements.

However, Clerc assured that high rates are only temporary and will decrease once new tonnage is phased in or normal sailing routes resume. Nonetheless, Lars Jensen, CEO of Vespucci Maritime, remarked that it has been over 200 days since container lines began diverting vessels around Africa, suggesting that the situation might not be resolved in the medium term and could take years to return to normal.

The Loadstar’s managing editor, Gavin van Marle, commented on a recent podcast that carriers are likely to push for further rate increases in the coming months, capitalizing on the current market conditions to maximize profits.