The global container shipping industry has faced its share of challenges recently. Container shipping costs have skyrocketed over the past few months, exacerbating global inflationary pressures. Here are the latest updates on the global container shipping situation. ⬇️
Port Congestion and Rising Demand
A key driver of the price surge is a supply-demand imbalance. China manufactures over 80% of the world's shipping containers, but production fell to its lowest level since 2016 in 2023 as reported by maritime research and consulting firm Drewry.
This shortage in supply coincided with a surge in demand. Accumulation of containers and long wait times at major ports like Singapore and Shanghai, mainly due to labor disputes, also reduced container availability, increasing demand. The first quarter of 2024 witnessed a 9.2% increase in market demand compared to the same period in 2023. This surge, coupled with the ongoing situation in the Red Sea and early peak season demands, has led to a significant escalation in spot rates and contributed to a spike in freight prices. The good news is the congestion just started to ease in some major seaports like Singapore’s.
The results of this bottleneck, however, according to Bloomberg, is tripling prices for shipping containers from Asia to Europe and North America since 2023.
Spot rates for shipping containers from Asia to the US and Europe hit new highs in early 2024, topping $6,000 per 40-foot container on key routes. Between April and May 2024, average spot rates from Asia to North Europe jumped 31%, the US West Coast 30%, the Mediterranean 25% and the US East Coast 22%. According to the Drewry World Container Index, analysts suggest rates could reach as high as $10,000 in the coming months. Rates have steadily risen despite some moderation in the pace of increases.
Every year, the major shipping carriers increase their shipping rates as part of the annual general rate increase (GRI). These increases vary by carrier, service level, weight, and other variables, but generally equate to about a 5% increase on average. This year, the several factors explained above have contributed further to the normal increase. This price hike reflects a broader trend of increasing costs across the shipping industry.
The situation has caused headaches for exporters, retailers, and other businesses dependent on ocean freight especially in Asia, the USA, and Europe. While the shipping industry is adept at navigating fluctuations, the current wave of challenges in these regions suggests a prolonged period of adjustments. Particularly that the industry has yet to recover fully from the disruptions caused by the COVID-19 pandemic.
KSA: A Highly Resilient Container Shipping
The good news is that despite the global situation, there are regions where the container shipping sector is witnessing stable growth, most notably the KSA. In the 15th annual Agility Emerging Markets Logistics Index, Saudi Arabia has solidified its position among the world's top 10 emerging markets, showcasing improvements or stability in key areas.
The KSA sees this year a significant rise in new commercial files according to Logistics Middle East, Saudi container handling surged 48% in Q2 2024 per the Ministry of Commerce’s report.
The Ministry’s quarterly bulletin revealed that 2,457 new commercial files were registered for container handling services, a significant rise from 1,658 files in the same quarter last year. Norobally, Saudi Arabia is working towards transforming its container shipping sector.
The Saudi Ports Authority (Mawani) has initiated several major projects, including constructing a $40 million integrated logistics park at King Abdulaziz Port in Dammam. Saudi Vision 2030 targets quadrupling the annual container throughput to 40 million TEUs by 2030, with the support of the Neom project and the expansion of King Abdullah Port.
Vervo Middle East: How We're Adapting
At Vervo Middle East, we see these challenges facing ocean container shipping as opportunities. Despite the market’s pressures, our focus remains on delivering exceptional value and service to our clients to maintain an uninterrupted and resilient supply chain.
While it’s true that container shipping costs have risen due to global demand fluctuations, at Vervo Middle East, we actively leverage our extensive global network and expertise to mitigate the situation for our partners and clients. Our multimodal shipping services combined with meticulous route planning and optimized container utilization enable us to offer competitive rates and reliable service.
The shipping industry is dynamic, which is why it is also adaptive, since 2008, the Vervo Group has been able to navigate through the industry’s global fluctuations, and our long-term commitment to our 10000+ clients never wavers.
Vervo Middle East delivers region-wide in the KSA, UAE, Qatar, and all over the Middle East besides +120 countries worldwide while handling all the logistical needs of your cargo from customs clearance, warehousing, specialized deliveries, customizable marine insurance, and more. We continue to ensure that your shipping needs are met with the utmost care and professionalism.
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