Trade tensions drive up shipping costs quickly reminiscent of Covid disruptions

Global goods trade is on the rise, with shipping rates increasing and supply-chain managers feeling the pressure as demand spikes. The situation is reminiscent of the chaos and skyrocketing ocean freight rates seen during the pandemic, according to Emily Stausbøll, a senior shipping analyst with Xeneta.

Concerns about port congestion in Asia, labor strikes in North America, and trade tensions between the US and China are contributing to the monthlong advance in seaborne freight rates. Additionally, ocean shipping has been strained by recent Red Sea attacks, forcing vessels to take longer routes.

Importers and exporters are seeing a surge in shipments as retailers prepare for back-to-school, Halloween, and year-end holiday sales seasons. However, spare container capacity is limited, leading to full vessels and rising spot rates.

Spot rates for containers from Asia to the US West Coast and northern Europe have more than tripled compared to a year ago. Some carriers have announced further rate increases for June, indicating that conditions are not expected to ease in the short term.

Delays in China and other key ports are exacerbating the situation, making it challenging to keep up with demand across the Pacific. The US government’s announcement of more tariffs on Chinese imports is adding to the urgency for companies to stock up now.

Overall, the surge in container rates is driven by underlying economic activity and fears of potential shortages. Companies are pulling forward their imports to avoid disruptions, with concerns about potential strikes and contract talks further fueling the sense of urgency in the industry.