2024 Reasons for the International Ocean Freight Increase

The international ocean freight forwarding industry has witnessed a dramatic surge in shipping rates as we move into 2024. This unprecedented rise in costs is driven by a complex interplay of geopolitical events, economic factors, and industry-specific challenges. Understanding the multifaceted reasons behind this surge is crucial for businesses and stakeholders involved in global trade. This article delves into the primary factors contributing to the escalating ocean freight rates, offering a comprehensive overview of the current landscape and the potential implications for the future. From geopolitical crises to economic recovery and trade protectionism, we explore the diverse elements shaping the shipping industry’s dynamics.

Impact of the Red Sea Crisis: At the end of 2023, international shipping prices continued to rise, especially on European and American routes, due to the Red Sea Crisis. Ships were forced to avoid the Red Sea and detour around the Cape of Good Hope in Africa, causing global congestion and extending voyages by 10-14 days. This has tightened the capacity supply and demand.
Economic Recovery and Geopolitical Changes: The ongoing economic recovery and changes in geopolitical situations have significantly affected sea freight prices. Increased demand for goods in the United States has ended the destocking cycle, leading to inventory replenishment. Industries with high export dependence, such as equipment, furniture, and textiles, are showing signs of restocking, driving up exports from relevant countries.
Trade Protectionism and Tariffs: Countries like Brazil, the United States, and those in Europe have imposed or are considering imposing tariffs on new energy vehicles and other products. Manufacturers are rushing to ship goods before these tariffs take effect, occupying significant vessel consolidation space.
Supply and Demand Relationship of Transportation Capacity: Many trunk lines in the shipping industry are fully loaded, resulting in insufficient transportation capacity. As market demand recovers, freight rates are rapidly increasing. Global trade is expected to grow by 5% in 2024 compared to 2023.
Collective Price Hikes by Shipping Companies: Leading shipping companies such as Mediterranean Shipping (MSC), Maersk, Hapag-Lloyd, CMA, Evergreen, OOCL, COSCO Shipping, ONE, YANG MING, and HMM have announced route price hikes. These increases cover routes from Asia to Europe, the Mediterranean, North America, South America, East Africa, West Africa, South Africa, and more, leading to significant price surges across multiple directions.
Severe Port Congestion and Backlog of Goods: Port congestion has caused foreign trade goods to pile up, reducing the operation of capacity control and container return rates. This has led to a severe shortage of containers at export ports, exacerbating the imbalance of warehouse space.
Capacity Allocation and Control by Shipping Companies: Shipping companies may cancel schedules and control transportation capacity, further exacerbating supply shortages.
Currency Depreciation and Inflation: The global trend of currency depreciation and rampant inflation has increased the demand for converting currency into physical assets, thereby driving up demand for shipping services.
Panic-Induced Repetitive Bookings: Shippers and booking parties, driven by panic, engage in repetitive bookings, leading to imbalanced market demand, price increases, and container shortages.

These factors collectively contribute to the recent significant surge in ocean freight rates. If you would like to reduce the stress of your international shipping logistics workload, then contact us for advice and experienced management today.