Spot Freight Rate for 40ft Containers on US East Coast Routes Surpasses $5,800, Up 120% Year-on-Year​

Spot Freight Rate for 40ft Containers on US East Coast Routes Surpasses $5,800, Up 120% Year-on-Year​

In the grand chessboard of global trade, ocean freight rates have always been a focus of attention from all parties. Recently, the skyrocketing spot freight rate for 40ft containers on the US East Coast routes has been like a boulder thrown into a calm lake, causing a thousand waves. Data shows that the spot freight rate for 40ft containers on the US East Coast routes has exceeded $5,800, with a year-on-year increase of as high as 120%. This stunning increase has triggered widespread discussions among industry insiders and put enormous pressure on many enterprises that rely on the US East Coast routes for trade.​

Imbalance Between Supply and Demand Behind the Soaring Freight Rates​

Strong Recovery on the Demand Side​

From the demand perspective, multiple factors have jointly driven the explosive growth in freight demand on the US East Coast routes. On one hand, after a period of downturn, the global economy has gradually shown signs of recovery. As one of the world’s largest economies, the vitality of the US domestic consumer market has gradually recovered, and consumers’ willingness to buy has increased, which has led to a significant rise in demand for various imported goods. A large number of consumer goods, electronic products, clothing, etc., from China, Southeast Asia and other regions are continuously shipped to the United States, and the US East Coast, as an important cargo distribution center, undertakes a considerable proportion of import tasks.​

On the other hand, after a series of twists and turns, Sino-US economic and trade relations have shown positive signs. The uncertainty of trade policies has decreased, and enterprises’ confidence in the future trade prospects has been boosted, which has prompted more enterprises to increase their export efforts to the US market. Enterprises that were originally on the sidelines have resumed or increased orders one after another, leading to a sharp rise in freight demand on the US East Coast routes. Many Chinese export enterprises said that the number of orders from the United States has increased significantly recently, and in order to deliver goods on time, they have to increase shipments, which undoubtedly further intensified the competition for shipping space on the US East Coast routes.​

Lagging Adjustment on the Supply Side​

In sharp contrast to the booming demand side, the supply side has been relatively slow in responding to the growth in demand. In the past period, due to the instability of the global trade environment and the continuous impact of the epidemic, shipping companies have adopted measures such as reducing capacity and flight frequencies to control costs. A large number of ships have been idle or scheduled for maintenance, and new ship construction plans have been delayed or cancelled.​

When demand suddenly rebounded sharply, shipping companies found it difficult to rapidly increase capacity to meet market demand in a short period of time. The deployment of ships, the arrangement of crew and the planning of routes all require a certain amount of time and cost, which has led to a tight supply of shipping space on the US East Coast routes. Some shipping companies said that although they have tried their best to increase flights, due to the limitation of ship resources, they still cannot fully meet the market demand. In addition, the loading and unloading efficiency of ports has also become an important factor restricting supply. With the sharp increase in cargo volume, ports on the US East Coast are under great pressure, congestion occurs from time to time, and the waiting time of ships at ports is prolonged, which further reduces the turnover efficiency of capacity.​

Chain Reactions Caused by Policy Changes​

Uncertainty in Tariff Policies​

Changes in tariff policies have always been one of the important factors affecting the global ocean shipping market. In recent years, Sino-US tariff adjustments have been frequent, bringing great uncertainty to trading enterprises and the shipping market. In anticipation of tariff increases, many enterprises, in order to reduce costs, often choose to ship goods in advance, concentrating goods that were originally scattered in different time periods to the United States in a certain period. This “rush to export” behavior has led to large short-term fluctuations in freight demand, exerting a huge impact on ocean freight rates.​

When the market expects tariffs to rise, enterprises will speed up their shipment to compete for limited shipping space resources, pushing up freight rates. Once the tariff policy eases or adjusts, the shipment rhythm of enterprises will change, leading to unstable demand. This kind of market behavior caused by the uncertainty of tariff policies makes the freight rate on the US East Coast routes like a roller coaster, fluctuating 不定. For example, on the eve of some key tariff adjustment nodes, the freight rate on the US East Coast routes often rises sharply, and after the policy is clarified, it may fall to a certain extent, but generally remains at a high level.​

Adjustment and Orientation of Trade Policies​

In addition to tariff policies, adjustments in other trade policies have also had a profound impact on the freight rates of the US East Coast routes. In order to promote their own economic development and industrial structure adjustment, governments of various countries will introduce a series of trade policies, such as trade subsidies and import and export restrictions. The implementation of these policies will change the pattern and flow direction of global trade, and then affect the supply and demand relationship in the ocean shipping market.​

Some countries may set higher thresholds for certain imported goods to protect their own manufacturing industries, which reduces the export volume of related goods and has a negative impact on the freight demand of the US East Coast routes. On the contrary, to encourage the development of specific industries, the government may introduce preferential policies to promote the export of related products, thereby increasing the freight demand for the US East Coast routes. Adjustments in trade policies will also trigger chain reactions among trading partners, leading to the redistribution of global trade flows, further exacerbating the complexity and volatility of freight rates on the US East Coast routes.​

Impacts and Challenges to Related Industries​

Soaring Costs for Export Enterprises​

The significant increase in the spot freight rate for 40ft containers on the US East Coast routes has brought heavy cost pressure to export enterprises. For many small and medium-sized enterprises with meager profits, the rise in freight rates may directly eat up the original profit margin, or even lead to losses. Take clothing export enterprises as an example. Due to the increase in freight rates, the transportation cost of each piece of clothing may increase by several dollars, which is a huge burden in the fierce market competition.​

To cope with the rising costs, some enterprises have to increase product prices to pass on part of the costs to consumers, but this may reduce the competitiveness of products in the market and affect sales volume. Some enterprises that cannot bear the cost increase may choose to reduce export business or even abandon the US market, which is undoubtedly a huge blow to the development of enterprises and the expansion of international markets. Many export enterprises have expressed the hope to stabilize freight rates by negotiating long-term contracts with shipping companies, but under the current situation of market supply and demand imbalance, the effect is not ideal.​

Difficulties Faced by the Freight Forwarding Industry​

Against the backdrop of soaring freight rates, the freight forwarding industry is also facing unprecedented difficulties. On one hand, freight forwarding enterprises need to face the dual pressure of customers on shipping space and price. Customers hope that freight forwarders can provide stable shipping space at a lower price, but due to the tight shipping space in the market, freight forwarding enterprises often find it difficult to meet customers’ needs. In order to obtain limited shipping space resources, freight forwarding enterprises have to conduct tough negotiations with shipping companies, and even need to pay higher prices to ensure that customers’ goods can be shipped on time.​

On the other hand, competition within the freight forwarding industry has become increasingly fierce. In order to compete for limited customer resources, some freight forwarding enterprises may adopt low-price competition strategies, which further compresses the profit space of the industry. Some small freight forwarding enterprises, due to limited financial strength, are at a disadvantage in terms of shipping space acquisition and price negotiation, and their survival is facing a severe test. Freight forwarding enterprises also need to deal with various complex procedures and document requirements to ensure the smooth customs clearance and transportation of goods, which also increases the operating costs and management difficulties of enterprises.​

Consumers May Bear the Consequences​

As the costs of export enterprises rise, this part of the cost may eventually be passed on to consumers through price transmission. US consumers may have to pay higher prices when purchasing imported goods from China and other countries. Whether it is clothing, electronic products or daily consumer goods, the rise in prices will directly affect consumers’ living costs and consumption experience.​

For some enterprises that rely on imported goods, the rise in the prices of raw materials and components will also increase their production costs, which in turn will affect their production and operation. This may lead some enterprises to reduce production scale, lower product quality or increase product prices, all of which will have a negative impact on consumers’ interests. If the freight rate on the US East Coast routes remains high, consumers may have to bear the pressure of rising prices for a period of time, which will also have a certain negative impact on the US domestic consumer market and economic stability.​

Outlook for Future Trends and Coping Strategies​

Dynamic Changes in Market Supply and Demand​

From the perspective of future market supply and demand, although the imbalance between supply and demand on the US East Coast routes is difficult to fundamentally improve in the short term, with the passage of time, the market will gradually self-regulate. On one hand, seeing the strong market demand and huge profit space brought by rising freight rates, shipping companies will gradually increase capacity investment. The construction and delivery of new ships will ease the tight shipping space to a certain extent, and it is expected that the capacity will increase in the next few months to a year.​

On the other hand, with the further clarification of trade policies and the continuous advancement of global economic recovery, the shipment rhythm of enterprises will gradually stabilize, and the large fluctuations in freight demand will also be alleviated to a certain extent. With the rise of other emerging markets and the diversification of trade patterns, part of the freight demand may be diverted to other routes, which will also have an impact on the supply and demand relationship of the US East Coast routes. The dynamic changes in market supply and demand will be affected by a variety of factors, and the future trend of freight rates on the US East Coast routes is still uncertain.​

Coping Strategies for Industries​

Facing the significant increase in freight rates on the US East Coast routes and market uncertainty, related industries need to adopt a series of coping strategies. For export enterprises, on one hand, they should strengthen communication and negotiation with customers to share the cost pressure brought by rising freight rates. They can reduce costs by adjusting product prices and optimizing supply chain management. On the other hand, enterprises should actively expand diversified market channels, reduce dependence on a single market, and reduce the risks caused by fluctuations in freight rates on a certain route.​

Freight forwarding enterprises need to strengthen their cooperative relations with shipping companies to obtain more stable shipping space resources and more reasonable prices. By improving their service quality and professional level, they can provide customers with better logistics solutions and improve customer satisfaction and loyalty. They can also reduce operating costs and enhance their competitiveness by integrating resources and optimizing business processes. For consumers, they need to pay attention to market price dynamics, reasonably adjust their consumption behavior, and choose products with higher cost performance. Government departments should also strengthen supervision of the ocean shipping market, maintain market order, and promote the healthy and stable development of the market.​

The phenomenon that the spot freight rate for 40ft containers on the US East Coast routes has exceeded $5,800 with a year-on-year increase of 120% is the result of the combined effects of global trade market supply and demand imbalance, policy changes and the industry’s own development. This phenomenon not only has a profound impact on export enterprises, the freight forwarding industry and consumers, but also brings new challenges and opportunities to the development of global trade. In the future, all parties need to pay close attention to market dynamics and actively take response measures to adapt to the changing market environment and achieve sustainable development of the industry.