A combination of fewer vessels on the water, an imbalance in
trade flows to and from China, and competition between cargoes
has kickstarted a rapid increase in shipping costs for
container freight out of China. The higher rates have already
affected prices for a number of commodities, including white
fused alumina (WFA), graphite and manganese flake.
Costs are spiraling to record highs on major routes out of
China, including to Europe, North America, India, the Black
Sea, and North and West Africa. Several market sources
described an increase in their container freight costs of
anything between 70% and 150% over the past in November quotes,
against second-quarter rates. Quotes increased every few days
in the second half of November, sources said.
Quotes for the China-Northern Europe (main ports) route
increased from less than $1,000 per 20ft container in April
2020 to $1,800-2,500 per container, although some sources said
they were quoted close to $3,000 per container. Other routes
recorded increases of a similar magnitude.
The China-India route was quoted by two Fastmarkets contacts
at around $2,000 per full container load (fcl), compared with
$350-750 earlier last year. For China-US, traders were quoted
more than $5,000 per fcl in mid-December 2020. The
China-Ukraine route via the Black Sea – quoted in
previous months at $1,500-2,000 per container –
increased to more than $3,000 per container, according to
Caught in the middle
Traders, distributors and other intermediaries between
producers in China and end-users in Europe and other
destination markets will be the ones that bear the brunt of the
freight cost surge on existing orders, sources told
Fastmarkets. As a large share of supply agreements are settled
with buyers on a cif destination port basis by intermediaries,
any subsequent changes to logistics costs – such as
those that have been happening recently – are owed by
"On all of our signed cif [agreements], there is nothing we
can do. I, as a trader, have to make up for the higher costs.
We’ll lose so much money [on those transactions],"
a trader said.
"I spoke to my customers about this, but they said,
'It’s your problem. This is why we use you and
don’t go direct.’ And
they’re right: there is a degree of exposure that,
right now, the buyer is protected from, if he has agreed
delivered terms with us," a second trader said.
Three more intermediaries speaking to Fastmarkets all said
they would be quoting only on an fob China basis in future
offers, with the freight rate excluded.
"When I signed my supply contract, I had a calculation of
$40 per tonne for freight, China to Rotterdam. That was based
on our existing agreements [with carriers] to determine future
costs. Now it’s $80 per tonne, $90 per tonne in
some cases," a third trader said.
The surge in container freight costs has developed
concurrently with a progressive tightening in vessel space
available on carriers. Ship owners reduced the capacity of
ships on water at the height of the Covid-19 pandemic last
year, when global trade flows ground to a halt, and have yet to
return those vessels to active operation.
Fewer ships are on water and those are running on a reduced
sailings schedule. At a time of rising demand from the global
trade industry (in conjunction with the end-of-year purchasing
period as well as a rebound of imports while national economies
try to bounce back from pandemic-induced weakness), the lack of
space on ships has given way to long delays and tight
"Space on the ship is, arguably, a more pressing matter than
the freight cost itself," one distributor argued, suggesting
that carriers, once a vessel is over-booked, would pick parcels
with the highest agreed freight rate to maximize their
This can generate a vicious cycle between shipping rates and
space, the source added: "If you can find a slightly better
rate, that might mean you won’t get the space on
the ship because your cargo is cheaper than others. If then the
cargo is not loaded and the quote loses its validity, you are
left with no shipment and you have to start again."
Surcharges are another set of issues, on top of standard
shipping rates. Sources maintained surcharges have also been
rising fast, compounded by the limited availability on vessels:
the tighter the space on the ship, the higher the
One Chinese mineral supplier said of the latest quotes he
received for routes to the Mediterranean and to North Africa:
"To guarantee the container availability, there is a surcharge
of $500 per box [for 38 containers in total]. Once you add the
surcharge to the fob price, [I incur] a negative profit margin
of 24% in [one route] and 17% on the second route."
Other sources added they are being quoted additional MFR
(marine fuel recovery) surcharges of $310 and $296 respectively
for North Europe and the Mediterranean.
While market participants have seen the highest increase in
container freight costs from China to Europe and North America
in recent weeks, other routes underwent the same rise earlier
last year. Several destinations in Latin America went from
$300-750 per container in previous months to around $4,000 [in
December 2020], one exporter said.
One European importer said he "just about managed" to secure
a cost of $1,850 per container into Rotterdam, although the
peak season surcharge (PSS) added another $400 per container,
adding: "My freight cost has increased by 150% with these