Corporate Moving — Persisting high costs and logistic constraints

Overview of current freight challenges

As global shipping continues to face significant upheaval, our recent analysis underscores the escalating costs and logistical challenges affecting freight transportation. Global events and high demand across trade lanes in the second quarter of 2024 have reduced capacity and increased freight rates, sometimes to premium levels.

Surge in shipping costs

Recent updates from industry indices have shown a significant increase in the cost of shipping containers, with prices now exceeding four times what they were just nine months ago. While there has been a slight deceleration in the rate of these increases as of July, the costs for shipping remain substantially higher than those of the previous year, reflecting continued volatility in the freight market. Specific rate restorations and increases have been noted from North East Asia to Australia and New Zealand and South East Asia to the same destinations, indicating a trend of rising costs across these routes.

Geopolitical and environmental impact on routes

The main reason for freight increases is the current disruption in the Red Sea, which has stretched global shipping capacity, with more shipping needed to service European and Asian routes. Since December, there has been a 50% reduction in shipping traffic navigating the Suez Canal, offset by a 70% jump in sailings around the less direct Cape of Good Hope. Adding to disruptions is a shortage of shipping containers and congestion at some Mediterranean ports, including the ports of Singapore and Colombo. Carriers are avoiding sending their ultra-large container vessels through the Mediterranean, which is currently a dead end. Therefore, ports such as Algeciras, Tanger Med, Barcelona, and Valencia face increased arrivals, leading to additional congestion.

Record demand and seasonal adjustments

Data from Xeneta in May highlighted an all-time high in ocean freight demand, prompting retailers to secure slots for the autumn season well in advance to manage anticipated delays and secure needed capacity. This surge in demand is particularly pronounced in routes connecting Asia to other continents, further straining the already limited shipping capacities.

Persistent challenges and future outlook

Recent data suggest a mere 1% increase in average container costs, per the latest Drewry index update on 11 July. However, the chances of returning to shorter and more traditional shipping routes soon are low, suggesting ongoing disruptions. Additional surcharges have been introduced, such as a new port risk surcharge for shipments from Asia to Haitian ports, reflecting the escalating operational risks and costs in certain regions.

Our commitment to keeping everyone informed

Reliable and timely information is crucial during these challenging times. We are committed to providing transparent updates to help our clients make informed decisions. We will explore alternative options to avoid delays and additional costs. However, the situation remains unpredictable, potentially leading to increased freight costs, storage in transit fees, and demurrage costs. We will always advise our clients as soon as possible regarding any such changes.

For further assistance and personalised advice, please contact your designated Santa Fe Relocation consultant.

James Gooding
COO Move & Managing Director, North Asia
Santa Fe Relocation
james.gooding@staging.santaferelo.com