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Freight Rates Surge Due to Geopolitical Tensions and Port Congestion

July 11, 2024

Freight rates surge due to geopolitical tensions. Freight rates from Asia to Europe have risen sharply recently, with tanker rates reaching as much as $8000 for 40-foot containers, more than double compared to the price at the end of last year.

In many polymer markets, imports are becoming uncompetitive due to the higher cost of transport, such as polypropylene (PP), acrylonitrile butadiene styrene (ABS), and nylon engineering resins (PA6/PA66). This loss in competitiveness has become even more pronounced with Europe domestic prices falling for these polymers, particularly PA6/PA66 and ABS, which have seen triple digit decreases in July.

Geopolitical tensions are causing ships to divert from traditional routes like the Suez Canal. This has led to increased congestion at major hubs such as Singapore. This rerouting results in longer transit times and higher operational costs for shipping companies.

China is increasing export volumes to maintain economic stability amid slower domestic growth, is likely straining global shipping capacities and contributing to higher rates.

Additionally, the rush to ship goods before impending U.S. tariffs on strategic sectors further tightens container availability and drives up costs.

The combination of rerouting, port congestion, and increased exports suggests that high freight rates may persist. The global shipping industry faces challenges from geopolitical uncertainties, supply chain disruptions, and changing trade policies.