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Freight Shipping Rates Spike, and ZIM Soars in May 2024!

In the last update of the Drewry World Container Index, we see a spike in prices for all routes from Shanghai.

At fundamental levels, the shipping rate increases seem to be due to high vessel capacity, re-routing via the Cape of Good Hope (Red Sea problems) and equipment shortages.

 

(https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry)



An important effect is in the business of lower profit margin shipping companies, such as ZIM shipping. Look at the stock price movement, in anticipation of higher profitability due to higher shipping rates. The price soared ~50% since the beginning of the month! Anyway we are probably going to see some price consolidation at current levels of 17-18$ before more price movements. Also, the next earnings call is around the corner and we'll have a better idea of how the new LNG vessels and operating conditions are affecting the profitability of the company.



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More information:

Flexport, Freight Market Update: May 9, 2024

https://www.linkedin.com/pulse/freight-market-update-may-9-2024-flexport-gdguc/


    The shipping year began on May 1 with a strong General Rate Increase. This increase in the spot shipping rates was due to strong U.S. import demand and the renewal of long-term fixed contracts, resulting in vessels sailing at or near capacity.
    The Panama Canal Authority announced another increase in daily transits. Shipping lines, however, remain cautious about re-deploying capacity through the canal as demand for ships on westbound (via Cape of Good Hope) transits remain high and vessel weight restrictions remain in place.
    We are keeping an eye on the Canadian railroad contract negotiations. The railway union has announced a possible strike beginning on May 22. A strike would impact all rail services within Canada on both Canadian National and CPKCS railways.
    The Red Sea situation continues to be chaotic with vessels rerouting via the Cape of Good Hope, impacting on-time performance and schedule reliability. Vessels on the water are still at risk of drone attacks. Vessels routed via the Mediterranean Sea might be impacted. We’re closely working with liners for any further deployment updates.
    Bookings remain strong after the Chinese Labor Holiday. Another round of GRI (General Rate Increase) for the second half of May is scheduled for $1000 per 40-foot container. Shippers are pushing cargo for earlier departure to avoid further freight cost increases. For now, vessels are projected full through Week 21 (the last week of May). Week 22 is also filling up. It is highly recommended to place bookings four weeks in advance if possible.
    More equipment shortages were reported by CMA/Evergreen/Hapag Lloyd/Yangming/HMM. Foreseeing the situation will be tough through May until empty containers are fully recovered. It is highly recommended to pick up containers right after the container yard opens, or as soon as EIR (Equipment Interchange Receipt) is available to print per carrier local practice. Don’t wait till the last minute!
    Capacity is available for base-port to base-port moves to Asia, North Europe and Mediterranean ports of discharge.
    Some inland rail locations are spotty on equipment related to global disruption of container flows. When booking to load at an inland rail point, shippers are encouraged to submit bookings 3-4 weeks in advance of CRD (cargo ready date).

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