Sea Freight Demand Soars, Pushing Rates Up

Sea Freight Demand Soars, Pushing Rates Up
July 28, 2020 Hannah Marshallsay
sea freight demand soars

The last month has seen a dramatic jump in demand for cargo to be shipped from Asia and the Indian Sub Continent resulting from the reopening of retailers throughout Europe. Capacity still remains lower than normal, pushing rates to an all time seasonal high.

The pandemic has been a challenging period for shipping lines, with falling demand as never seen before, resulting from the impact of the coronavirus crisis on consumers and business. Throughout the pandemic, carriers have shown an affinity for balancing supply to demand, to keep freight rates steady, by pulling back on capacity. It has been reported that more than a quarter of all sailings on Asia-to-Europe and Transpacific lanes have been cancelled since the beginning of March. This widespread removal of capacity from blank sailings and the withdrawal of services has maintained high freight rates. 

The recent spike in demand from Europe, the UK and the US on shipments however has meant that the aggressive blanking programmes of the shipping lines has added even further pressure to available space. This scenario has resulted in utilisation levels not seen since the high in the 1990s and some spot rates as high as 40% above that of a year ago.

Rates on the rise

The June demand surge had carriers cancel fewer sailings in July compared to the previous month. Shipping lines are also reacting to the current higher demand by adding ad-hoc sailings which help alleviate the issue but schedules are irregular. As well as rate levels rising, some shipping lines are also introducing Peak Season Surcharges covering shipments in August.

Is this the ‘new normal’?

The outlook for trade and for the global shipping network is still uncertain and risky. While we are seeing a real growth in demand, it is not clear whether this demand is sustainable. At the same time there is no doubt that the supply of space is the major issue – if carriers were to re-introduce the same levels of capacity that existed at the same time last year then the issue we see today would be considerably less of a problem.  We expect that ocean freight carriers will continue their practice of tactical sailing cancellations for the foreseeable future, due to the still uncertain and risky outlook for trade and for the global shipping network.

Impact for customers

The restrictions in space has resulted in some delays. The outlook is that space saturation will continue to be very tight over the coming weeks and we expect this to continue until more additional capacity is put into the market. 

We would like to reassure our customers that despite these challenges our services are fully operational from all destinations. The impact from factors arising from this situation may cause irregularities from time to time, but we continue to handle all of our customers’ shipments and transport, and all our employees aim to provide the best possible service despite the current challenges.

We would like to thank all of our customers once again for their support during this period.

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