While 2021 and early 2022 was a time period filled with endlessly rising shipping rates, 2023 has been a year known for lower rates. Now, a different picture has emerged as we head into the fourth quarter of the year in just a few weeks. Both U.S. barge spot rates and global container rates on key trade routes have risen over the past month of summer 2023.
Low water levels on the Mississippi River are driving up barge spot rates.
First, in the U.S., barge spot rates are rising in one critical trade route: the Mississippi River, a strategic waterway for U.S. exports of Midwest grain, corn, and other exports. The increased costs come as levels on the Mississippi River are decreasing to very low water levels, following a trend seen last year. A year ago, very low water levels led to over 2,000 barges being stranded due to receding water.
It is coming time for the annual major soybean and corn harvest, and these exports are exported via the Mississippi River to the rest of the world. The forecast is not calling for an increase in rain, which is adding to the uncertainty. As a result, barge spot rates are up nearly 50% in St. Louis (at $23.34 per ton) compared to the end of August, and 42% year-over-year. According to Bloomberg, the increases are up 85% from the past three years. Water levels have decreased since June, which has reduced the amount of barges able to move these critical exports.
Additionally, the Ohio River is seeing decreased water levels, another waterway that is connected to the Mississippi and plays a crucial role in transport.
Outside of the U.S., broader shipping rates have also risen modestly over the past two months, reversing very-low rate levels.
Last month, it was reported that spot rates for containers grew at the fastest rate in over two years, following a year and a half slump. Drewry, which tracks container prices, saw its index jump by nearly 12% in the second-half of July to $1,761 per 40-foot container. As of the end of August, rates were still at the $1,740 level, up from the low of $1,474 set at the beginning of July.
Container rates from Shanghai, China to the crucial port destinations of Los Angeles on the U.S. West Coast and New York-New Jersey on the U.S. East Coast both saw associated jumps in the second-half of July, too, according to Drewry. On the Shanghai-Los Angeles trade route, container rates jumped from a low of $1,581 per 40-foot container on June 29th to $2,217 per 40-foot container at the end of August. There was a similar story on the Shanghai-New York trade route, where container rates rose from just over $2,500 per 40-foot container on June 29th to $3,438 per 40-foot container on August 31st.
Time will tell what direction rates continue in. Weather patterns will determine the situation in the U.S. Midwest, while global events and demand will determine global container rates.
We at MTS Logistics will continue to keep you posted as rates change.
