Shipping & Freight Cost Increases, Freight Capacity, and Shipping Container Shortage

Freight & Shipping Delays

We are following the news from Ukraine closely and keeping those affected by this tragic situation in our thoughts.Beyond the human tragedy, the crisis is also impacting freight and supply chains in multiple ways, from higher fuel costs to sanctions and disrupted capacity, which we explore in this week’s update.

For logistics, the most widespread impact across all modes will likely be rising fuel costs. As oil prices climb, we can expect increased costs to trickle down to shippers.Combined with ongoing pandemic-related delays and closures, non-stop demand for ocean freight from Asia to the US, and a lack of capacity, ocean rates are still very elevated and transit times volatile.

Ocean freight rate increases and delays

On the regional level, most ships near Ukraine were diverted to alternate nearby ports at the outset of the hostilities.Many of the top ocean carriers have also suspended new bookings to or from Russia. These developments could increase volumes and are already resulting in pile-ups at origin ports, possibly causing congestion and increasing rates on these lanes.Higher fuel costs from climbing oil prices caused by the hostilities are expected to be felt by shippers across the globe, and ocean carriers who continue to service ports in the region may introduce War Risk Surcharges for these shipments. In the past, this has translated to an additional $40-$50/TEU.

Approximately 10k TEU travel across Russia by rail from Asia to Europe each week. If sanctions or fear of disruption shifts significant numbers of containers from rail to ocean, this new demand will also put pressure on Asia-Europe rates as shippers compete for scarce capacity.Though the war in the Ukraine is expected to impact ocean freight and rates, those effects have yet hit container prices. Prices were stable in February, increasing just 1% to $9,838/FEU, 128% higher than a year ago and still more than 6X the pre-pandemic norm.