Freight Market Insights
Ocean shipping is a crucial component of global trade ensuring the smooth and effective movement of goods from manufacturers to consumers. By volume, about 90% of goods traded globally are shipped by sea, with most of those goods by value, sailing in containers. Keep reading for this month’s ocean and air update, or stay up to date on a weekly basis with our weekly update available here.
Ocean rates – Early GRIs and pre-Lunar New Year demand lift Transpacific, Asia–Europe spikes fade, Transatlantic softens
January opened with firm pricing across the east–west lanes as start-of-year GRIs were supported by earlier-than-usual pre-Lunar New Year demand. But by mid-month rates either leveled off or started to ease, with most lanes back to December levels by early February as LNY demand cooled.
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Asia–North America West Coast jumped 29% to a peak of about $2,7500/FEU by the second week of January and Asia–North America East Coast climbed 20% to more than $4,000/FEU, with both increases holding better than the short-lived Q4 GRI attempts. Asia–North Europe and Asia–Mediterranean also surged, increasing from $2,400/FEU in early December to about $3,000/FEU to Europe and 22% to $4,800/FEU to the Mediterranean.
By mid-January, though, momentum slowed as the pre-holiday rush appeared to peak and carriers refrained from pushing additional GRIs. Asia–Mediterranean and North Europe both logged their first weekly declines since October, and transpacific prices eased from early-January highs even as blank sailings were announced for the seasonal slowdown. By early February rates had settled at or slightly below end of December levels as LNY approached, though still well below last year’s levels due to fleet growth on all lanes as well as more cautious importer demand on the transpac.
Winter weather disrupted logistics cross-modes in both the US, Europe and Western Med in late January and early February, but as LNY demand had already started to ease, these disruptions did not materially impact rates.
Major carriers CMA CGM, Maersk and Hapag-Lloyd have all now returned a small number of services to the Red Sea, implying that a full scale restart may be getting closer, though geopolitical tensions make timing still quite uncertain.CMA CGM, Maersk and Hapag-Lloyd have all now returned a small number of services to the Red Sea, implying that a full scale restart may be getting closer, though geopolitical tensions make timing still quite uncertain.
Air rates – Freightos Air Index cools post-peak, with later January rebound for the transpac
The Freightos Air Index (FAX) showed normalization in January as Q4 peak season demand receded. In the first weeks of the month, China–US rates stepped down 23% from December’s highs toward the mid-$6.00/kg range, while China–Europe eased into the mid-$3.00/kg range. Southeast Asia lanes followed a similar trajectory.
By late January, winter storms in the US and some pre-Lunar New Year frontloading helped push China–US rates back up, closing the month at $6.75/kg. Southeast Asia–US prices were p slightly to $4.57/kg in late January. China-Europe rates, meanwhile, remained stable at $3.57/kg, with Southeast Asia–Europe prices at $3.11/kg.–US rates back up, closing the month at $6.75/kg. Southeast Asia–US prices were $4.57/kg in late January. China-Europe rates, meanwhile, remained stable at $3.57/kg by end of January. Southeast Asia–Europe prices were at $3.11/kg.
Understanding the Freight Market & Trends
Multiple factors can impact operations and rates in the container shipping market.
Increases in consumer demand for goods leads to increased demand for ocean freight and can put pressure on operations and lead to higher prices as space on vessels fills up.
Examples of drivers of increased demand include typical seasonal increases like those that occur most years during the ocean peak season from about July to October to build inventory for shopping events from back-to-school through the holiday season.
But demand can also be driven by geopolitical factors like trade wars that push shippers to increase orders before new tariffs go into effect, or unique events like the pandemic that drove consumers to shift spending from services to goods as they were stuck at home.
An increase in demand and container traffic can often lead to congestion at ports, which also tends to delay vessels and reduce effective supply in the market. Congestion for other reasons – like bad weather, labor strikes that create backlogs, or unusual events like the blockage of the Suez Canal in 2021 or the Red Sea diversions in 2024 – can also lead to backlogs and congestion.
Together, increases in demand or port congestion (and the two often occur together) put upward pressure on freight rates until demand declines and/or congestion eases. Ocean carriers will increase rates by announcing General Rate Increases (GRIs) for prices on a given lane, or adding to the existing base rate through different surcharges like a Peak Season Surcharge or Port Congestion Fee.
When demand for shipping decreases, freight rates generally drop as well. Again, demand can decrease seasonally during the non-peak months of the year, or can be driven by macroeconomic factors like recession or inflation.
Carriers will try to nonetheless keep vessels reasonably full and freight rates at profitable levels by reducing capacity through decreasing the number of vessels they operate by canceling, or “blanking” scheduled sailings. Downward pressure on rates can also happen if the global fleet has grown through the building of new vessels but more quickly than demand has expanded.
The container market is considered quite a volatile one, and plenty of examples even from the last few years demonstrate that unexpected changes in demand, spikes in port congestion, or geopolitical events can disrupt operations or send freight rates spiking.
This volatility makes staying on top of trends in the market all the more important to logistics stakeholders committed to making informed decisions and creating strategies for supply chain resiliency even in times of disruptions.
Key Factors Affecting the Freight Market
As noted, multiple factors can impact the container freight market by driving changes in the supply of available capacity or demand for container shipping. These include:
Seasonal demand increases from July to October in advance of consumer events and in the lead up to the Lunar New Year holiday in China – usually in February – as shippers pull forward a few weeks of demand before manufacturing pauses over the holiday break.
Increases/decreases in consumer spending linked to general economic growth or recession or by unforeseen factors like the boost to consumer spending on goods during the pandemic.
Geopolitics can change freight dynamics too. Trade wars that result in tariffs can lead to a rush of importing activity before the tariff is rolled out. Blockages of waterways, like in the Red Sea, can also impact freight costs by causing the market to adapt.
Port congestion reduces the available supply of container capacity as vessels wait for a spot to open at a port. Congestion can be caused by bad weather, labor strikes, or even just a big enough increase in demand and traffic that can cause a backlog at ports.
Fleet growth – Ocean carriers need to determine in advance how many new vessels to order and sometimes the growth of the fleet can outpace the growth in demand. When this happens, carriers face downward pressure on rates as the market is oversupplied.
The volatility of the international freight market makes staying on top of trends in the market all the more important.
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