Ocean Freight Spot Rates Set to Surpass Red Sea Crisis Peaks: A New Surge in Shipping Costs

Ocean freight container shipping spot rates are projected to surpass the peak levels seen during the height of the Red Sea crisis as the latest round of rate increases takes effect on 1 June, according to data released by Xeneta today. Peter Sand, Xeneta’s Chief Analyst, reported: “The ocean freight container shipping market has experienced rapid and dramatic increases throughout May, and this trend is expected to continue with further growth in spot rates.

"On 1 June, spot rates will reach a level not seen since 2022, when the Covid-19 pandemic was severely disrupting ocean freight supply chains. The current market is grappling with a mix of uncertainty and disruption, which is driving the increase in spot rates. The speed and magnitude of this recent spike have surprised many, including the CEOs of the largest ocean freight liner companies.”

Market Rate Increases by Region

Far East to US West Coast:

• Expected to hit USD 5,170 per FEU on June 1, surpassing the Red Sea crisis peak of USD 4,820 from February 1. This marks a 57% increase during May and the highest spot rates for this trade in 640 days.

Far East to US East Coast:

• It is anticipated to reach USD 6,250 per FEU, slightly below the Red Sea crisis peak of USD 6,260, but a 50% rise since April 29.

Far East to North Europe:

• Expected to climb to USD 5,280 per FEU on June 1, exceeding the Red Sea crisis peak of USD 4,839 from February 16. This is the highest rate for this trade in 596 days and a 63% increase since April 29.

Far East to Mediterranean:

• Set to reach USD 6,175 per FEU, surpassing the Red Sea crisis peak of USD 5,985 from January 16. This is a 46% rise during May and the highest rate for this trade in 610 days.

Factors Behind the Rate Spike

Xeneta’s data attributes the increase to several factors, including ongoing conflicts in the Red Sea, port congestion, and shippers frontloading imports ahead of the traditional Q3 peak season. Sand explained: “Importers have learned from the pandemic and are now shipping goods earlier to protect supply chains. This early peak season is adding to market uncertainty.”

Sand also noted that efforts by ocean freight carriers to mitigate Red Sea diversions by increasing transshipments in the Western Mediterranean and Asia have led to severe port congestion. Re-aligning capacity to cope with longer sailing distances has contributed to rate increases on trades like the Transpacific.

Implications for Shippers

The spike in spot rates is challenging for shippers. Carriers prioritize high-paying shippers, leading to cargo delays for those with lower rates on long-term contracts. Freight forwarders face new surcharges and are being pushed to premium services, with costs passed on to shippers. Despite these challenges, Sand sees some optimism: “While spot rates will rise again on 1 June, the growth rate is slowing, hinting at a potential easing of the situation.”

Impact on India’s Trade

Container freight rates for trades out of India have struggled to maintain gains made during the Red Sea crisis. Analysis by Shipping News shows varied rate movements across different trades:

• West India-Europe: 20-foot container rates remain firm at USD 2,700, but 40-foot rates have fallen to USD 2,500 from USD 2,800 in April.
• West India-US East Coast: Rates dropped to USD 2,100 per TEU from USD 3,650 and to USD 2,350 per FEU from USD 4,300 in April.
• West India-US West Coast: Rates increased slightly to USD 2,500 per TEU and USD 2,900 per FEU.

Global Ocean Freight Market Outlook

Despite multiple challenges, India's merchandise export trade had a positive start to fiscal year 2024–25, with exports up 1% year-over-year to USD 35 billion in April. The Federation of Indian Export Organizations (FIEO) highlighted the resilience of exporters amid geopolitical tensions and emphasized the need for better liquidity support and free trade agreements.

Carrier adjustments due to Red Sea diversions have mostly kept containers moving on schedule, but congestion and delays are increasing. Asia-North America spot rates are nearing USD 5,000 per FEU, about their peak during the Red Sea crisis, and have risen nearly 70% from their April low.

As ex-Asia demand picks up, congestion and rate spikes are likely to continue. However, the current disruptions may be less severe than those during the pandemic. Demand increases are not surging, and US ports are better equipped to handle current volume levels. If demand subsides post-peak season, rates and disruptions should decrease, though not to pre-crisis levels.

Air Cargo Impact

Ocean logistics disruptions may push more volumes to air cargo, though rates have remained stable so far. However, increased demand could lead to rate rebounds, as seen in Middle East air cargo export rates.

Rate Overview

Asia-US West Coast: USD 4,917/FEU (13% increase)

Asia-US East Coast: USD 6,323/FEU (18% increase)

Asia-N. Europe: USD 4,876/FEU (6% increase)

Asia-Mediterranean: USD 5,637/FEU (3% increase)

Air index rates have remained relatively stable, with minor decreases and increases across different routes.

Shippers should prepare for continued high rates and potential delays, though the situation may improve if demand pressures ease.