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Mar 24,2022

Sea freight costs may go higher under the double attack of war and COVID!

UNCTAD (United Nations Conference on Trade and Development) has warned that the Ukrainian-Russian conflict could cause 1.5 million containers transported by rail between Asia and Europe to be diverted to sea, further driving up ocean freight costs.

The UNCTAD report on the impact of the Russian-Ukrainian war on trade and development highlights that Russia and Ukraine are important components of the Eurasian land bridge. Restrictions on Russian airspace, operator uncertainty, and security concerns will all affect land and air cargo between Asia and Europe.


"While Russian airspace is closed to 36 countries, some freight forwarders are currently advising against booking overland freight between Asia and Europe," UNCTAD said.


Sea freight costs may go higher under the double attack of war and COVID!


Over the past two years, due to the pandemic and the resulting disruption to global supply chains, shippers have increasingly turned to rail, air and even trucking from China to Europe to address congestion in seaborne trade between Asia and Europe problems, which led to record high freight rates and greatly reduced service reliability.


“In 2021, 1.5 million sea containers will be transported by rail from western China to Europe. If the current volume of freight transported by container rail is added to Asia-Europe seaborne demand, this will mean an increase of 55% on the already congested maritime trade route. percent to 8 percent," the report said.


Given capacity constraints, the result could be higher ocean freight rates between Asia and Europe, even though rates are now retreating from record highs.


Freight rates in the spot market remain at around $14,000 per FEU, a level not seen since late March 2021, with long-term contracts at $9,000 per FEU.

While rates on the Asia-Mediterranean route have remained stable, rates on the Asia-Nordic route have softened in the first few months of 2022, undermining the route's premium over the Asia-Mediterranean route in the second half of 2021.