- Spot-rate shippers on East-West and North-South routes face significant cost volatility, with average fluctuations reaching $1,400 per container.
- Unpredictability creates financial risks such as negative margins, unplanned landed costs, and reduced export competitiveness.
- Even long-term contract shippers have experienced unexpected surcharges due to recent geopolitical disruptions.
- Intra-Asia trade stands out for its stability and low rate fluctuations, contributing to its continued growth.
Freight rate volatility continues to be a defining feature of global shipping, even years after the major disruptions of the Covid era. East-West routes experience the sharpest rate fluctuations among key trade lanes, while intra-Asia trades remain comparatively stable. Multiple factors contribute to this volatility, including geopolitical tensions such as the Red Sea attacks, shifting supply-demand dynamics, tariff policy changes, and rising costs tied to insurance and fuel in high-risk regions like the Gulf.
Notably, transpacific rates from Asia to the U.S. West Coast have shown extreme swings recently, dropping significantly early in the year before surging again. This unpredictability poses complex challenges for shippers, especially when planning logistics and costs. These insights are drawn from a report by Drewry Shipping Consultants Limited.
Unstable Shipping Rates Add Pressure to Supply Chain Planning
Rate volatility introduces significant financial risk for manufacturers, retailers, exporters, and importers relying on short-term or spot market agreements for ocean freight. Unanticipated swings in shipping costs can directly impact landed costs, cause negative margins on exports, and make products less competitive in specific markets. In many cases, top management holds logistics executives accountable for cost overruns, even when external factors drive these.
The risk is particularly severe for companies dealing in low-value goods, where an unexpected $2,000 increase in freight per container can completely erode profit margins. While shippers under annual contracts may be somewhat shielded, they are not immune. Recently, many have faced sudden surcharges, such as those tied to Red Sea disruptions and vessel rerouting, which began emerging in late 2023.
Shippers moving cargo along East-West routes face high exposure to such cost fluctuations. Data from the Drewry East-West Freight Rate Index—which averages spot rates across trans-Pacific, Asia-Europe, and trans-Atlantic lanes—shows a standard deviation of roughly $1,400 per 40-foot container over the past two years, underlining the ongoing volatility in these key trade corridors.
Intra-Asia Trade Offers Stability
Spot-rate shippers operating on East-West routes face significant cost uncertainty, with average rate swings of around $1,400 per container. For many, such fluctuations are difficult to anticipate and absorb. Proprietary data from Drewry’s Container Freight Rate Insight further highlights that North-South trade lanes—connecting the northern and southern hemispheres—also show notable rate volatility, exposing shippers to similar financial pressures.
In sharp contrast, intra-Asia spot-rate shippers enjoy far more stable and affordable freight conditions. According to Drewry, cost variability in this region is, on average, seven times lower than on East-West routes. Even during the peak disruption of the COVID period, rates on the Intra-Asia Container Index never surpassed $2,000 per 40-foot container. Meanwhile, the East-West index soared to a staggering $11,000.
This relative stability, combined with lower base rates, may help explain the growing strength of the intra-Asia trade. However, for shippers outside of this fortunate region, substantial freight cost risk remains an ongoing challenge on both East-West and North-South container routes.
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Source: Drewry Shipping Consultants Limited
