Key insights:

1. Unseasonal increases in demand for ocean freight out of Asia are putting additional strain on a container market already stretched thin by Red Sea diversions, and pushing ocean rates up.

2. Capacity shortages are leading to skipped port calls and schedule disruptions, contributing to reports of empty container shortages and congestion in some major ports in China, and in Singapore and Malaysia as well.

3. Daily transpacific rates are at $4,800/FEU to the West Coast and $5,800/FEU to the East Coast, 40% higher than in April. Asia - N. Europe rates are up 50% to $5,000/FEU with Mediterranean prices above $5,600/FEU and 3.5 times higher than in 2019.

4. Some carrier announcements for more increases in June – an additional $1,000/FEU to Europe and $2,000/FEU to N. America – show they do not expect conditions to ease in the short term.

5. Ocean disruptions have not led to an increase in air demand and rates just yet: China - N. America rates were level at $5.86/kg last week though prices to Europe rebounded 11% to their early-month level of about $4.00/kg. S. Asia export rates remain elevated but level, and Middle East - N. America rates, which had been elevated on increases in sea-air volumes, have eased by 15% in the last weeks to $2.52/kg.

Ocean rates - Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) increased 12% to $4,333/FEU.

• Asia-US East Coast prices (FBX03 Weekly) climbed 5% to $5,359/FEU.

• Asia-N. Europe prices (FBX11 Weekly) increased 11% to $4,603/FEU.

• Asia-Mediterranean prices (FBX13 Weekly) increased 6% to $5,495/FEU.

Air rates - Freightos Air index

• China - N. America weekly prices stayed level at $5.86/kg

• China - N. Europe weekly prices increased 11% to $4.00/kg.

• N. Europe - N. America weekly prices increased 1% to $1.75/kg.

Analysis

Unseasonal increases in demand for ocean freight out of Asia – due to the possible start of a restocking cycle in Europe, and a pull forward of peak season demand by N. American importers out of concern over labor or Red Sea disruptions later in the year – are putting additional strain on a container market already stretched thin by Red Sea diversions.

Even with fleet growth from new vessels being applied to add more ships to rotations and accommodate longer journeys around the south of Africa, carriers are still facing a capacity shortage. This shortage is leading to late arrivals and port omissions as carriers skip some port calls to try and keep up with weekly schedules at major hubs. Delays and omissions are contributing to reports of empty container shortages and congestion due to vessel bunching at some ports in China, with congestion also a problem in Singapore and Malaysia.

Increasing demand, tight capacity and delays are combining to push ocean rates up from their already elevated Red Sea-adjusted floors reached in April.

Weekly prices rose last week and continued to climb this week, with the latest daily rates on the transpacific up to about $4,800/FEU to the West Coast and $5,800/FEU to the East Coast, for about a 40% increase since the end of April. The latest Asia - N. Europe rates are up about 50% since April to almost $5,000/FEU with prices to the Mediterranean above $5,600/FEU and 3.5 times higher than in 2019.

Carrier announcements of additional rate increases set for June show they do not expect demand to ease or conditions to improve in the short term. CMA CGM is setting Asia - N. Europe rates at $6,000/FEU starting June 1st, and Hapag-Lloyd has announced an Asia - N. America Peak Season Surcharge of $600/FEU to start June that will climb to $2,000/FEU mid-month.

In other ocean developments, two months after its collision with the Key Bridge in Baltimore, crews refloated the Dali and removed it from the crash site. Fully restored access to the port is expected by the end of the month, with Maersk already accepting Baltimore bookings for June.

In Canada, a government review of which services must be excluded from a union strike will likely delay the planned rail worker strike for at least the next 60 days, though the sides are reportedly still no closer to a resolution.

Finally, increases in ocean rates and delays could push some additional demand to the air, though no significant shift seems to have started just yet.

Freightos Air Index rates from China to N. America were level at $5.86/kg last week though prices to Europe rebounded 11% to their early-month level of about $4.00/kg.

Prices out of S. Asia, where Red Sea-driven ocean delays have had the strongest impact on air demand and rates, were level at $5.40/kg to N. America and $3.95/kg to Europe last week, though they remain about double their levels before Red Sea diversions started.

Rates from the Middle East to N. America, which had been elevated from a shift to sea-air options, have eased by 15% in the last couple weeks to $2.52/kg.