Shipping container rates have been skyrocketing amid the pandemic, forcing importers to lock in rates that are up to 50% higher from year-ago levels. As a result, margins have been tightening, and concerns surrounding inflation have been magnified across the global economy.
According to research by S&P Global Platts, contract rates for routes between North America and Asia have averaged between $2,500 to $3,000 for a 40-foot container over the past several weeks, marking an increase of 25% to 50% from last year’s levels. The surge in shipping rates are creating numerous logistics problems for US importers, and as Hapag-Lloyd CEO Rolf Habben notes, the elevated container rates will likely continue well into the second and even the third quarter.
In the meantime, shipping ports in California reported record import levels in March— which, historically, tends to be a quiet month for containerized inflows. The surge in imports is largely due to elevated consumer demand, which skyrocketed after Americans used their stimulus checks to purchase goods from Asia and other overseas countries. Indeed, the US trade deficit soared to an all-time high in February, rising by 4.8% to a record $71.1 billion; in fact, the demand for imported goods is so high, that there is a shortage of shipping containers to deliver goods into the US.
The heightened supply chain challenges are also giving rise to inflation concerns. The producer price index for final demand increased by 1% in March— double the median forecast by economists surveyed by Bloomberg. Similarly, the latest CPI print for March rose by 0.6% from the previous month— the largest jump since 2009, suggesting that the increasing producer prices are being passed down to consumers.
Information for this briefing was found via S&P Global Plats, Bloomberg, and the BLS. Thee author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.