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Overall price increase! Will the freight next year be more expensive than this year?

Since the Houthi armed forces attacked the merchant ship in November last year, the maritime freight rate has remained at a high level. Shanghai Container Export Freight Index (SCFI) soared from 993 points in November last year to 3,733 points in July this year. Although it fluctuated afterwards, it still hovered around 2,384 points this month. Within a year, the index soared nearly four times, and the increase of sea freight, which was often doubled, once became an important reason affecting the profit of textile foreign trade. Just as 2024 is coming to an end, a number of shipping companies announced that the freight rate rose in January!

Shipping prices have risen across the board! Recently, a number of world-renowned shipping companies have announced that they will raise their shipping fees from January 1, 2025. Shipping giants such as mediterranean shipping company (MSC), COSCO Shipping, Yangming Shipping, Maersk, CMA CGM and HMM have all issued price increase notices. The freight rate per 40-foot container on the western route of mediterranean shipping company will be increased to $6,150, and that on the eastern route will be increased to $7,150. COSCO Shipping also raised the freight rate on the western route of the United States to $6,000, and that on the eastern route of the United States to $7,000. Yangming Shipping plans to raise the GRI, with the increase of about $2,000 per 40-foot container in the United States, the West and the East. However, people in the freight forwarding industry pointed out that although many shipping companies indicated that they planned to raise prices from January 1, they were not in a hurry to make public statements. From February next year, the three major shipping alliances will be reorganized and the market competition will be intensified. Shipping companies have begun to actively grab goods and customers to cope with possible market changes. Shipping companies and people in the freight forwarding industry all said that the final price increase and whether it can be successfully increased depends on the relationship between market supply and demand. At the same time, if there is a strike at the East Coast Wharf in the United States, it will inevitably have an impact on the post-holiday freight rate. In addition, a number of shipping companies plan to expand their capacity in early January to grab high freight rates. The reason for the rise in shipping prices! The reasons for the price increase of sea freight are complex and diverse, involving changes in market supply and demand, rising costs, external environmental impact and industry competition strategies. The change of market supply and demand is an important factor leading to the increase of sea freight. With the gradual recovery of the global economy, trade activities have increased significantly, and transportation demand has increased accordingly. Especially near the Spring Festival of the Lunar New Year, factories are eager to complete the order shipment before the year, which has promoted the surge in container shipping demand. The cargo volume of American routes has increased significantly, and the loading rate of ships on some routes remains high. For example, the high loading rate of European routes gives shipping companies the confidence to raise prices. The rising cost is also a key factor to promote the price increase of sea freight. Panama Canal Authority implemented a new "LoTSA" system, which led to a significant increase in the operating costs of shipping companies such as CMA. In order to recover the extra cost, the shipping company chose to levy a surcharge. In addition, due to the conflict between Palestine and Israel, some ships chose to sail around the Cape of Good Hope, which increased the distance, duration, fuel consumption and operating costs. These factors together push up the cost of shipping, which in turn urges shipping companies to raise freight rates. The uncertainty of the external environment also has an impact on the sea freight. The strike risk of the East Coast Wharf in the United States still exists. In order to avoid the strike affecting the shipment, enterprises accelerated the shipment in advance, which further promoted the increase of freight rates. At the same time, uncertainties such as emerging tariff policies and strict export restrictions that may occur in 2025 have also prompted enterprises to prepare goods for shipment in advance, increasing transportation demand. Industry competition strategy is also one of the reasons for the price increase of sea freight. Although from February 2025, the three major shipping alliances will be reorganized and the market competition will be more intense, in January, shipping companies still hope to obtain higher profits through price increases. Some shipping companies have begun to actively compete for goods and customers to cope with future competition. Through technical adjustment of shipping space, reduction of supply and other measures, shipping companies have effectively controlled market liquidity, and guided customers to expect freight rates to continue to rise with the help of the atmosphere of rising prices. The freight rate is still bullish next year! Regarding the trend of ocean freight rate next year, Korea Trade Association conducted a survey on 413 shippers, shipping companies and freight forwarders. The survey results show that 74.4% of the respondents believe that the freight will increase or maintain the current level: among them, 39.8% expect the freight to increase and 34.6% think it will maintain the current level; Only 23.6% predicted that the freight rate would decrease. In-ho Lee, vice-president of the Korea Trade Association, said that the association plans to cooperate with international organizations such as the World Shippers' Union (GSA) to deal with the regulation of shipping service supply by shipping companies. People in the freight forwarding industry predict the trend of container freight rate next year. Although the long-term freight rate next year may be higher than this year, the freight rate in the spot market will not exceed this year's level. Overall, the freight rate for the whole year next year is expected to be the same as that in the fourth quarter of this year. There are also large freight forwarding companies that shipping companies may continue to regulate freight rates by reducing and merging classes, so the freight level next year may be the same as this year. However, the top management of another listed freight forwarding company predicts that the Red Sea crisis may be lifted next year. Once the crisis is lifted, ships do not need to bypass the Cape of Good Hope, which will release additional capacity. Coupled with the increase of new shipbuilding next year, the market freight rate may drop sharply in the second half of the year. Exporters and logistics companies believe that one of the reasons for the increase in maritime freight next year is that the Middle East Hussein incident caused ships to bypass the Cape of Good Hope, thus reducing the actual supply of ships and aggravating the bottleneck phenomenon. Due to the shortage of supply, in order to maximize profits, shipping companies have also taken temporary suspension and ship repair to further limit supply. In addition, if Trump's tariff policy is implemented, the maritime freight rate may rise sharply in the short term by avoiding the rush of high-tariff goods. Historical experience shows that SCFI soared by 62% two months after Biden announced the tariff increase in May last year. Source: Network

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