Surging Demand and Rising Costs Up Ahead

Canaan Group has been monitoring Asia/North America and Asia/Europe trade conditions resembling those during the pandemic’s peak. While demand surges between 10-20% year-on-year across the entire customer base, certain unique factors have arisen that have reduced sailing capacity, equipment availability, and increased prices specifically for shipments coming out of Asia.

Among the major factors driving increased rates are the Houthi rebel attacks at the Red Sea which incentivize cargo vessels to avoid the Suez Canal and instead, navigate around the tip of Africa at the Cape of Good Hope. The diversion lengthens voyage times by no less than a week and creates imbalanced and unexpected concentrations of container equipment around the globe thereby creating a shortage of available equipment.  China is now in an equipment deficit situation.

The month of May has traditionally been a peak season with expected peak season surcharges and GRIs but with the sustained capacity demand and blank sailing programs, and the short-term outlook for the full year is bleak. FAK and spot facilities for most shipping lines remain closed until June or later causing booking challenges for customers who are willing to pay the escalated rates quotes by carriers. Despite the desire to pay-to-play of many importers, carriers are retracting rates shortly after issuance and replacing them with higher levels.

With carriers increasingly being required to adhere to various carbon taxes and emissions trading systems (ETS) imposed on from various nations, the expensive and prohibitive shipping situation is not expected to improve until Chinese Golden Week in October.

For more information on shifting global trade patterns and logistics strategies, please contact your sales team at sales@canaangroup.ca