The cost of sea freight is growing as the cost of container delivery increases

The increase in the cost of cargo delivery by sea has an additional impact on world prices for cereals and oilseeds.

Freight rates from the ports of the Black and Azov seas to North Africa and the ports of the Red Sea this season increased by 70-100% and added additional costs of about 1 15-20/ton per ton of grain.

The cost of freight from Argentina and Brazil to North African ports has increased to 8 80-90 per ton, which continues to have a negative impact on domestic purchase prices against the background of lower world prices for cereals and oilseeds.

The main reason for the increase in freight was the unprecedented increase in the cost of container transportation. According to VesselsValue analysts, rates under a one-year time charter agreement for vessels with a capacity of 8.5 thousand TEU increased by 350% over the year to 5 54 thousand per day.

In 2020, the container market sank significantly amid the pandemic, which led to a drop in demand in the consumer market. However, towards the end of the year, the market began to recover, and since the beginning of 2021 has shown steady growth.

An additional impetus for the growth of rates, in addition to the recovery of the market, was an imbalance in supply chains and a shortage of containers, as well as congestion in ports.

Not only freight rates for container ships are growing, but also the speed of vessels on services. According to VesselsValue, if in May 2020 the speed of container ships fell to a five – year low, then in April of this year the speed of ships increased by an average of 5.5% compared to June last year-from 13.99 knots to 14.76 knots.

The cost of sea transportation of containers from China has increased by 50% since March. Another cargo crisis triggered an outbreak of coronavirus in Guangdong province, the center of container trade, which led to the partial closure of the Yantian terminal in Shenzhen and the redistribution of cargo in favor of nearby terminals. The current situation caused traffic jams and disruptions in the operation of ports, the increase in cargo delivery times from China doubled - up to 65-85 days, and the cost of cargo delivery increased several times.