Peak shipping season is around the corner. Marked by heightened demand for goods in the run-up to Christmas, ocean freight rates are expected to remain high, and several factors contribute to this outlook.
It's normal for seasonal demand to spike in the months leading up to the holidays. The rat race begins, retailers rush to stock their shelves and that leads to a surge in orders that strains available shipping capacity. This year, demand is expected to be higher as e-commerce continues to grow. The increased demand places additional pressure on already congested shipping lanes, driving up rates.
Karim Jumma, VP of product management at e2open, says that as we approach the holiday season, ocean freight rates are poised to rise due to a confluence of ongoing issues and high demand.
"Recent turmoil, including attacks in the Red Sea, the CrowdStrike outage, labor strikes and the impact of Hurricane Beryl, has exacerbated fears of a freight crisis. Last year saw a dramatic fluctuation in rates, with lows of $5.8K per container in October 2023 and subsequent surges in 2024. This volatility, coupled with persistent supply chain challenges, is expected to drive up rates further. Retailers are anticipated to stock up early to mitigate potential shortages, fueling increased demand for shipping services and contributing to elevated rates," explains Jumma. Additionally, Jumma noted last month how we used to see retailers starting to shop in August, but now it’s already started because they are afraid of future disruptions and hedging against issues closer to the holiday season.
We talk about it ad nauseum but for a good reason: the global supply chain remains plagued by issues of port congestion, labor shortages and the lingering effects of the pandemic. These disruptions have led to heightened awareness of delays and changed the trajectory of shipping as we know it.
Jumma says capacity constraints and container shortages are likely to persist through the 2024 peak season, compelling shipping lines to consider surcharges to manage the high demand and maximize revenue.
"Rates for high-demand routes, such as Asia to the U.S., could range on the higher side of previous cycles, depending on the severity of ongoing disruptions and competitive pressures. Port congestion and broader supply chain disruptions, including geopolitical events like the Houthi attacks and labor issues in the East and Gulf Coasts, could further intensify these challenges," says Jumma. "As a result, while exact predictions are difficult, the combination of heightened seasonal demand and persistent supply chain issues suggests that ocean freight rates will remain elevated during the Christmas peak season.”
High seasonal demand and ongoing supply chain challenges suggests that ocean freight rates will stay elevated through the winter months. Retailers and shippers should prepare for continued cost pressures and consider strategies to mitigate the impact, including securing space early, exploring alternative shipping routes and diversifying suppliers.
