Red Sea-boosted container rates may be hitting their peak

LONDON – Spot ocean container rates finally fell this week after eight weeks of consecutive and rapid gains. They dropped 4%, according to container price analyst Drewry, to an average of $3,824 per 40-foot container.

Rates are still 88% higher than the same week last year and 169% higher than the pre-pandemic 2019 average of $1,420.

Not all routes saw declines, however. Rates from Shanghai to European destinations like Genoa, Italy, and Rotterdam, The Netherlands, experienced drops, but rates to the U.S. either rose or stayed the same. Rates from Shanghai to Los Angeles rose 2% to $4,421, a number double than what was seen a month ago. Rates from Shanghai to New York hovered around last week’s average of $6,143.

Drewry expects rates to continue to plateau as China’s factories gear down in February for Lunar New Year. In a webinar this week, Drewry downplayed the effect of the ongoing Red Sea turmoil on container shippers, especially going forward.

“The market globally is so heavily oversupplied following the ordering rush of the pandemic that it has ample cover for disruptions such as this,” said Simon Heaney, Drewry’s senior manager of container research.

“While having too many ships is generally a bad thing for container lines, in this case, it is providing quite a lot more resilience to cope with disruptive events,” he said.

Drewry expects disruptions to continue for the first half of the year. But even if they last longer, Heaney didn’t seem concerned.

“Clearly, you can’t just pick up ships and move them where you want to,” he said. “It will take time to reposition ships, so the pinch is going to be the worst in this initial stage. But we think things will ease once Red Sea diversions become part of the longer-term planning by carriers.”

“Rates in affected trades will remain elevated for the duration of the crisis, but they won’t go so high as to stoke inflation,” he said.

Heaney was hesitant to compare the situation as anything close to what was seen over the pandemic, as current demand for product is much lower.

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