Shippers should expect high container rates all the way into 2024

Two years ago, it cost approximately USD 1,700 to ship a container from Asia to the US west coast or to northern Europe.

Today, the long-term contract price is close to USD 6,000, and this level won’t be getting lower for many months, likely years, to come.

The former head of logistics at Electrolux has therefore had plenty to do, working alongside Jochen Gutschmidt, who has also previously been head of logistics, but at Netslé.

Right now, the clear advice to customers from Vang Jensen is to accept that the price surges are here to stay, probably for a really long time, and possibly as long as some time in 2024.

“I’m not optimistic on behalf of shippers. The price of a container going from China to the US west coast is currently close to USD 6,000. Many shipping companies have managed to secure long-term agreements with customers, which means that the price will in general not change very much for the next couple of years.

Bjørn Vang Jensen’s advice to shippers:

Vang Jensen says that, realistically, he doesn’t see a change in rates coming for roughly the next two years because the extraordinary market conditions that have now been discussed for 12-15 months are becoming ordinary.

As he puts it, “there’s chaos at ports, too few ships, too few truckers, too few trains, too few containers ... all things that simply can’t be solved in the short term.”

Include high rates in budgets going into 2024

The company can secure space if it pays the high rate, currently USD 6,000 on contracts

Examine the supply chain and find cost savings Use several carriers and not just one

Long-term contracts versus spot

In particular, shipping lines like Maersk, CMA CGM and HapagLloyd have announced that they are banking on long-term contracts, which quite a few customers, not least the big ones, could be interested in because they most of all want to secure space going forward.

Vang Jensen himself has had a customer who paid USD 30,000 to have a container shipped from China to the US, which was more than the price of the goods, but necessary because the cargo had to be delivered immediately.

If demand suddenly changed, the situation would naturally look different, if the need for transport took a dive. But according to Vang Jensen, there is nothing to indicate as much. Rather, for example, he expects the Chinese New Year in February, which usually takes steam out of the market due to factories shutting down and people travelling home, to be - basically - cancelled this year.

Demand remains high

“The prices we’re seeing now will continue far into 2023, and I don’t think demand will change. Unless the world goes into recession, which there’s nothing to indicate, or the coronavirus comes under control, which I don’t think will happen right away, the need for transport will continue to be very high.”

Looking back just one year, it’s clear how the market has only become more red-hot as time has passed, and that the predictions made by industry observers at the time, which seemed relatively gloomy, turned out to be very optimistic.

For example, both Hapag-Lloyd CEO Rolf Habben Jansen and DHL Global Forwarding CEO Tim Scharwath said at the time that they were seeing signs of an end to the upturn.

“For sea freight, I think we have to enter the second half of 2021 before we see a stable market again. The first quarter will definitely still be affected and so will the second quarter,” Scharwath said at a press conference held just prior to Christmas 2020.

Habben Jansen added:

“A lot seems to indicate that the strong market we’re seeing will also be present after the Chinese New Year and will continue into the second quarter.”