Ocean freight rates soared in 2020 and into early 2021, following surging demand in global shipping after a swifter-than-expected recovery from the COVID-19 pandemic. The question now is, will ocean freight rates continue to skyrocket on the Asia/North America trade lane?
No one knows for certain, but some industry experts are predicting spot rates will plateau after the Chinese New Year, however, still remain elevated for some time. While it is not expected that rates will come down sharply, there’s a view they may come down to a level we could refer to as more normal and reasonable. The downward trend should start with the premiums being charged by carriers for equipment and priority loading and, from there, lead to a slow decline of the actual ocean freight rates.
The high level of spot rates will also impact 2021 ocean freight contract rates, as they are currently three to five times lower than today’s FAK (Freight All Kinds) spot rates. The timing of the upcoming contract season favours carriers, as negotiating contract rates when spot rates are so high is an advantage for them.
Most contract rates took a nosedive back in 2016 when markets crashed. Carriers have tried but have been unable to increase contract rates ever since. It seems highly likely that 2021 may be the year when they actually succeed in doing so.
For more information, contact Cathy Fong, Manager – Freight Pricing.