What Happened: Shanghai Containerized Freight Index data released on June 4 shows that ocean-going shipping rates for Chinese exports hit highs not seen since August 2022, the South China Morning Post reported the same day.
Why It Matters: Seasonal demand, constrained capacity and higher insurance costs are spiking shipping rates, which will likely continue rising for the next several months, compounded by geopolitical and trade tensions. For example, the United States in May announced forthcoming tariffs of $18 billion on a wide range of Chinese goods, parts and components, leading buyers to scramble for finished products before the tariffs become effective between 2024 and 2026. Ongoing shipping disruptions in the Red Sea, as well as anxiety over the Taiwan Strait amid China’s military exercises around the island at the end of May, are likewise raising concerns about volatile disruptions to key shipping lanes amid the perception of a fraying international order. While the holiday rush means a seasonal spike is normal, sudden geopolitical disruptions are becoming increasingly frequent, with the attendant business uncertainty priced into the most recent data.
Background: The cost to ship a single 20-foot container from Shanghai to Europe currently sits in excess of $7,000, more than double the $3,000 rate from December 2023 and an increase of over 12%, or over $1,000 per container, from May 2023. Chinese exporters typically send products intended for holiday shopping to Western markets in the summer months, starting in July. Prices last spiked this dramatically amid China’s strict zero-COVID policy and former U.S. House Speaker Nancy Pelosi’s visit to Taiwan that sparked Chinese military drills in the Taiwan Strait.
Source: Stratfor.com | June 4, 2024