Container shipping tariffs up amid supply restrictions and strong demand

In its latest weekly report, shipbroker Xclusiv highlighted the remarkable surge in container shipping rates. These rates are now approaching record highs from the pandemic era, with the Baltic FBX index reaching USD 3,408 per TEU. This represents a significant increase, closing in on January 2020 levels and standing 150% higher than the last week of 2023. The driving forces behind this surge are twofold: a limited supply of containers due to rerouting around the Red Sea and robust demand across multiple regions. The early start of the busy season has further propelled rates on major east-west shipping routes, reaching their highest levels since September 2022. This boom affects nearly all routes, including those connecting Latin America, Africa, and Asia.

The situation echoes the container crunch experienced in 2021/2022, characterized by sudden demand spikes leading to a constrained fleet, shortages of containers, port congestion, and record spot rates. In 2024, shifting trade patterns have exacerbated the container shortage, and while congestion remains moderate for now, it may worsen as shippers vie for limited space. Container owners are expected to continue reaping record profits in Q2, following a turnaround from losses in late 2023. Geopolitical tensions in the Middle East, particularly the Red Sea rerouting due to Houthi attacks, played a pivotal role in this transformation, driving freight rates upward.

Shifting focus from market analysis to macroeconomics, April 2024 revealed a mixed inflation picture across major economies. In the United States, the Consumer Price Index (CPI) rose by 3.4% year-over-year, a slight decrease from March but nearing the Federal Reserve’s 2% target. Core inflation, excluding volatile food and energy prices, also dipped slightly to 3.6%. Meanwhile, the European Union maintained even lower inflation, holding steady at an annual rate of 2.4% compared to March.

These developments underscore the delicate balance between supply, demand, and geopolitical factors in the container shipping industry and the broader economic landscape. Due to these complexities, the impact on global trade and consumer prices remains a critical concern.