Container shipping and the web of global transport services linked to it are entering the usual peak season for demand, but this year's scenario planning includes many questions about supply.
Red Sea vessel diversions and port congestion have absorbed the industry's excess capacity from the end of 2023 when Houthi attacks intensified. Spot container rates have doubled since early May.
In Singapore, the world’s second-busiest port and a key transfer hub for cargo between Asia and the West, delayed shipments jumped 44% in May from a year earlier and were up 27% year-over-year through June 25th, according to data from FourKites, a supply chain visibility platform.
“The lack of available empty shipping containers in key export markets is an ongoing concern,” said Mike DeAngelis, head of international ocean solutions at FourKites. “Containers are getting caught up in a global mix of delays.” Adding to the bottlenecks is a demand reflex honed during the pandemic: the fear of missing out. Looming US tariffs on Chinese imports and a potential late-summer strike at East and Gulf Coast ports are boosting orders sooner than usual. Judah Levine, head of research at cargo-booking platform Freightos, advises planning for another couple of months of strains.
Levine predicts that spot container rates to Europe and the US from Asia might reach $10,000 per 40-foot equivalent unit in the coming months, up from the current $7,000 to $8,000. While it would take a confluence of other disruptive worst-case factors for rates to return to pandemic highs of $15,000 to $20,000, it’s not impossible, he said.
“To me, the most likely scenario is that we’re going to see a couple of months with a lot of pressure,” Levine said. “We may even get to those levels of $15,000 per container, but during the pandemic, we had months and months of that. This time, I think we could have some months but not many.”
Here’s a rundown of Levine’s scenarios for the second half of the year:
Worst Case: Ships continue avoiding the Red Sea, early peak-season demand remains solid, and port congestion lingers for months, extending global disruptions past Chinese Lunar New Year in late January. Adding a strike by dockworkers on the US East and Gulf Coast would push container rates to record highs set during the pandemic.
Best Case: Houthi attacks in the Red Sea cease, allowing carriers to return to optimal sailing schedules. After a few months of adjustments, cargo rates drop sharply as supply outpaces demand. Newly built ships coming into service would help push the cost for a 40-foot container back to pre-pandemic levels around $1,000 between Asia and the US and Europe.
Most Likely Case: Current demand strength softens, indicating that early orders were pulled forward from the third and fourth quarters due to looming US tariffs on Chinese imports, Red Sea delays, port strike worries, or a mix of all three. Spot rates might peak around $10,000 per 40-foot container this month and next, but they would decrease later in the year.
