Drewry World Container Index eases 1% to $4,473 as Shanghai-New York slips to $9,333

The Analysis

There is a stretch of coast I used to run in another life, Ningbo up to Shanghai, then Taicang and the river ports, Qingdao if the week went badly, and the habit that stayed with me from those years is simple. I do not read the freight headline first. I read the queue first. A rate tells you what somebody was charging on a Thursday afternoon. A queue tells you what the next three weeks are going to feel like, and it does not lie to you the way a rate sometimes does.

So when Drewry put out its assessment of Thursday 27 August and set the composite World Container Index at $4,473 per 40ft container, down 1% on the week, I registered it the way you register a weather report for a city you are not flying to. Shanghai to New York eased 2% to $9,333. Shanghai to Los Angeles did not move at all, $6,818 for the second week. Shanghai to Genoa came off 2% to $4,866 and Shanghai to Rotterdam 3% to $4,287. Soft, orderly, entirely forgettable as a pricing story.

The number underneath those lines moved hard, and it is the one I want to walk through. Average vessel waiting time at Shanghai went to 96 hours from 35 hours a week earlier. That is not a rounding difference, that is a different port. Thirty-five hours is an annoyance you plan around and then put out of your head. Ninety-six hours is a four-day hole punched in the middle of your schedule, and everything downstream inherits it, your cut-off at the yard, the window you cleared in, your truck bookings, your customer's shelf date, the cash sitting in that box. Then take the map around it, because this week the surroundings matter more than the four route numbers: seven blank sailings on the transpacific this week falling to four next week, Asia to Europe going the other way with blanks doubling from two to four, uncertainty at the Strait of Hormuz unresolved, some carriers cautiously resuming Suez Canal transits on improved security assessments, congestion not sitting politely at Shanghai alone but spreading across Asian ports, low Rhine water levels disrupting the barge legs into Europe's hinterland, and the Panama Canal set to reduce transit capacity from September on water constraints. That is this week. Everything else is commentary.

Let me put my cards on the table about what kind of week this actually is, because the headline writes itself as a pricing story and I do not think that is the right reading. A one per cent move on a composite index spread across eight lanes is noise dressed up as news. I have watched those same headline numbers go up two per cent and down two per cent inside a month while nothing at all changed on the ground, and I have watched a headline hold flat while my cargo missed three connections in a row. The triad that actually moved is elsewhere this week: waiting days, announced blanks, and two canals behaving badly.

Start with the two Americas, because that is where the largest absolute number sits and where people most often decide badly. This week's measure puts Shanghai to New York at $9,333 and Shanghai to Los Angeles at $6,818, a difference of $2,515 on the ocean leg. Every buyer I know looks at that difference and reads it as the cost of choosing the East Coast by all-water instead of unloading on the West Coast and running inland. That reading is wrong, and it is wrong because the number is not comparable at the door. New York pricing is pricing to a port that is already next door to a third of American consumption. Los Angeles pricing is pricing to a port that is roughly a continent away from that same consumption. Comparing them against each other without adding the inland leg is like comparing two ferry tickets without asking what it costs to get to the ferry.

Let me do that arithmetic properly, with the assumptions laid out so you can put your own figures in. Assume you have 10 FEU going to a distribution centre in New Jersey. Assume the two ocean numbers above are what your forwarder can actually get you. Assume your own quotes come back as follows: local delivery off the New York terminal at $600 per box, and rail from Los Angeles to the same New Jersey door at $3,200 taking assume nine days on the schedule you were given. Then the all-water option lands at $9,933 door to door and the land bridge lands at $10,018. Eighty-five dollars apart on ten boxes. Nobody should be picking a channel over eighty-five dollars, and if your sourcing team is, they have found the wrong lever.

Now put the days in, because the days are where the money is here. Assume your forwarder's own schedules say assume 33 days Shanghai to door via all-water to New York, and assume 25 days to the same door by way of Los Angeles with fourteen of those days across the Pacific, nine on rail, two in and out of terminals. The land bridge is eight days faster under those assumptions. Assume your carrying cost is $30 per FEU per day, a figure I use because it is easy to argue with; if your box carries $200,000 of goods at assume 12 per cent annual cost of capital the honest number is closer to $66 a day, so mine is conservative. Eight days saved at $30 a day is $240 per box of time value. Set that against the $85 you gave up on the movement itself and the land bridge wins by roughly $155 per FEU, call it $1,550 on the shipment.

The useful thing about writing it out that way is that it gives you a threshold instead of an opinion. Ignoring time completely, your break-even rail quote is $3,115, which is simply $9,333 plus $600 minus $6,818. Add credit for the eight days at $30 and the break-even moves to $3,355. So the answer is not yes or no, it is: this week's choice favours the land bridge for you only if your inland quote is real and holds. If your rail number is $3,500 because the container has to move on a day when equipment is tight, if the inland transit is assume twelve days rather than nine because your receiver sits further out, or if the vessel you would have booked to Los Angeles is one of the services whose berth window is being pushed around, the whole thing flips and it flips quietly. Ask your inland provider to quote you firm for ninety days rather than spot, and check what they do at the September holiday peak. The canal and the trucks are two different problems and only one of them is in the freight number.

Europe works the same way, only upside down, and it is worth a separate look because this is where I see people lose the most money at the moment. Rotterdam measures at $4,287 and Genoa at $4,866 this week, so the Mediterranean is $579 more expensive per 40ft box before anything else happens. Buyers read that as Genoa losing. Depending on where your customer actually unpacks the box, Genoa may be winning by a wide margin, and I would take that bet on cargo going to northern Italy or southern Germany any day of the week.

Put your own assumptions in again. Assume your receiver is Milan. Assume inland trucking from Genoa runs you $450 and from Rotterdam $2,100, which is roughly the shape of the two hauls when you include the driver hours and the Alpine crossing. Genoa then costs you $5,316 door to door against Rotterdam at $6,387. The Mediterranean gateway is $1,071 cheaper despite charging more on the ocean leg, and the sole reason is the road between the port and the door. Now assume the same box goes to the Ruhr instead. Genoa turns into assume $2,300 of trucking against Rotterdam's assume $350, and suddenly the ocean gap of $579 is irrelevant, it disappears inside the difference between the two truck rides. The trucking gap is $1,950, which is more than three times the ocean number everybody is arguing about.

There is a reason this keeps happening, and it is the same reason I keep going back to the maps. Ocean to Europe is priced per container to a port and it gets benchmarked across lanes by people whose job stops at the terminal gate. The moment your responsibility continues past that gate, which for most importers it does, the gate is not the end of the cost and it is not even the middle of it. If your organisation splits transport procurement from inland operations, this week is a good week to sit the two of them in a room and make them price one shipment together end to end. I have seen a lane switch nobody could justify on the ocean number turn into a five-figure monthly saving once somebody finally added the last two hundred kilometres.

While you are doing that European arithmetic, add the Rhine. Drewry flagged low water levels disrupting cargo flows, and I would treat that as an instruction rather than a footnote. The Rotterdam model works beautifully when your final leg can go by barge and cheaply upriver. When draft restrictions bite, that same barge either takes less or takes longer or takes neither, and the substitute is truck or rail on lanes that were priced assuming a full barge. Do not build next quarter's plan on a barge rate you have not asked about this week. Ask your operator two questions and write the answers down: what is the current load factor assumption on your inland legs, and what happens to my transit time and my movement cost if that load factor drops by a third. If they cannot answer within two days, you have learned something about your carrier as well as about the river.

Then there is capacity, and here the two oceans disagree with each other, which is genuinely unusual and genuinely useful. On the transpacific, announced blank sailings fall from seven this week to four next week. That is capacity coming back in, and Drewry paired it with an expectation that rates stay less volatile next week. On Asia to Europe the same measure doubles, from two this week to four next week. That is capacity being pulled out of a trade where the vessels are already late into the port that is already short of berths, and it is the combination you should be least comfortable with. Falling headline rates with thinning announced capacity is the classic shape of a rolling problem, because the line is softening and taking sailings away at the same time.

Write the rolling risk out as numbers and it stops being atmospheric. Assume you plan 30 FEU to Rotterdam next month across four acceptable departures, say 7 or 8 FEU per sailing. Assume one of the four is blanked at short notice, which under this week's announcement schedule is not an aggressive assumption. Your cargo consolidates onto three sailings. Assume one of your surviving bookings then rolls a week, because when a third of acceptable capacity disappears the line has more boxes than it has slots and somebody is going to be somebody else's problem. That is roughly 8 FEU arriving seven days late. At the $30 per FEU per day carrying assumption that is $1,680 of silent cost on that shipment, and if those 8 boxes feed a promotion whose date is already fixed in a retailer's system, it is not $1,680 at all, it is a conversation you did not want to have in October.

Now the time account, which is where this week's real damage is. Waiting at Shanghai went from 35 hours to 96 hours in seven days. That is 61 extra hours, two and a half days, appearing in the middle of every itinerary that touches that port, and it appeared faster than most people's planning cycle. Do not quote customers a date this month. Quote a band. My own working rule when I see a queue move like that is to take whatever padding is currently in your promise and add the whole week-over-week swing to it until you have seen two consecutive weeks of movement back the other way.

So assume your normal offer is arrival plus five days; this month you offer arrival plus eight and you tell the customer why, in writing, before they discover it themselves. The customer who is told about a delay in advance behaves nothing like the customer who finds out on the day, and this is one of the few places where an awkward phone call on a Monday saves you money on a Friday.

If you want the equivalent numbers rather than rules of thumb, here is the version for people who hold inventory. Assume you move 40 FEU a month on the lane in question, which is about 1.3 FEU a day. Assume your coverage model gives you fifteen days on the ground at destination. A swing of two and a half days in the port queue, plus assume a day and a half of knock-on dwell because the yard is denser when vessels bunch, is a four-day variability you did not design for. To survive four days of variability at 1.3 FEU a day you need about 5.3 extra boxes of cover parked permanently. At $30 per FEU per day that is roughly $160 a day of carrying, call it $4,800 a month.

Compare it to the alternative, because the alternative always feels free until it is not. Assume rescuing one FEU by air when something actually breaks costs you $25,000 including the premium over your normal movement. On those numbers, holding the extra cover costs less than the rescues if a queue event like this one hits your lane more often than about once every five months. This year I would take that bet across most Asia to Europe lanes and I would not take it blindly on all-water New York, where the September picture is still moving.

And that brings me to the piece of the port itself, because 96 hours is not an abstraction, it is a working condition. When vessels bunch at Shanghai four things happen at the terminal gate and none of them are in your freight quote. Yard density rises because nobody can move boxes out fast enough, so the gate appointment you booked for Tuesday is now against a yard with no free slots. Empty availability tightens because empties are queued behind laden import boxes. Driver hours get eaten by waiting, which means the truck price you negotiated for a four-hour turn is now a company making that money up somewhere else.

And the berth window your carrier sold you is now decided by whoever arrived first. You cannot fix any of that with a phone call to the rate desk. You can only adapt your own operating rhythm to it: book the earliest gate window of the day rather than the cheapest, spread your bookings across Monday to Thursday instead of letting them pile into the end of the week, use night gates where the port offers them, and get your export boxes into the terminal two days earlier than your habit tells you is necessary. These are boring instructions and they are worth more than the one per cent.

Where might you go instead, and what does it cost. For Yangtze Delta cargo the obvious move is another doorway. Ningbo is the natural substitution and it is the substitution every buyer tries first. Take it this week with care, because Drewry's own note says congestion across Asian ports rather than Shanghai alone. If Ningbo is absorbing overflow from the same bunching vessels, you have bought a three-hour truck ride to stand in a different queue. Ask your carrier where the queue actually is before you move anything, and ask for the berth waiting figure for the specific services you can book, not for the port in aggregate. Taicang, Nanjing and the river ports reached by barge are a different proposition and often the better one.

Assume barge from Taicang adds two to four days to your routing over running the box over the bridge, but it buys you independence from the truck queue at the gate and from driver availability at the peak. Against that, remember that your box still has to get onto a mother vessel, and if that mother vessel waits 96 hours at Shanghai you have added the barge days for nothing. The test is simple. Barge helps you when the constraint is at the gate. It does not help you when the constraint is at the berth.

The other substitution worth pricing is further south, and it is the expensive one. Shifting Sri Lankan and Indian cargo away from transshipment over Shanghai and onto Colombo or Singapore will shorten some routings and lengthen others, and it will change the set of services you can quote from. If you have a South Asia desk, get them to price one full shipment both ways this month so that you have a live number the next time someone proposes it at short notice. Let me keep it plain: have them price it, keep the number on file, and revisit it when the queue figure moves back.

The Suez resumption deserves a paragraph because it will be sold to you as good news. Some carriers are cautiously resuming Suez Canal transits following improved security assessments, and every one of those carriers will now be able to quote you a shorter transit to Europe than they could last month. In practice, treat those transits as provisional. The word in Drewry's assessment is cautiously, and cautious re-entry usually means rerouting back around Africa is still on the table with a decision taken on the basis of assessments you will not see. Keep two transit scenarios in your European plan, the short one and the long one, and promise your customer against the long one until you have watched the same service run short twice consecutively. The asymmetry here is brutal: if you commit to the short transit and it reverts, you owe three weeks of somebody else's schedule. If you commit to the long one and the ship comes home early, you have a pleasant surprise and nothing worse.

Then the Panama canal, which is the one that touches the American plan most directly. Set to reduce transit capacity from September amid water constraints. Reduced canal capacity generally shows up in one of two ways for an importer: fewer booking slots you can use, or longer waits before transiting, or both at different times in the month. Either way the all-water New York plan, the one that looked eighty-five dollars better before you credited any time, is the plan most exposed to this. Build a second version of your fourth quarter now, with Los Angeles plus inland rail as the primary and all-water as the fallback armed with your firm rail quote, rather than discovering in late September that your only planned channel is the one with the queue in it.

Let me name the traps, because a list of things that will bite you is worth more than a conclusion. Comparing port-to-port quotes across gateways with different distances to your door. Reading a 1% index move as an argument to wait for a better price while the vessels you would have been on stop being announced. Assuming that rolling is costless because you have not yet been charged for it. Treating a blank sailing notice as something that happens to other people's cargo. Building the European barge leg into your budget at today's water level. Believing the first short Suez transit you are quoted. Letting the transport team and the inland team argue about two different numbers on the same shipment. And the quiet one, promising an arrival date to a customer in week one of a month when the port's waiting figure has tripled in seven days.

What does all of this add up to in practice? It adds up to asking three questions every Monday morning from now until the ordinary pace returns. How many hours is the queue at the port I depend on, and did it move. How many blank sailings have been announced for the coming week on the trades I depend on. And has anything changed about the two canals, since those are the switches that can move a routing by weeks rather than days. Ninety seconds of work, and everything else you do this month keys off the answers.

Here is another working habit that has saved me more than any software. Keep a one-page picture of your lane with the door-to-door days written on it, not the port-to-port days, and update the number whenever you learn something rather than once a quarter. Update it when reality changes, not when the calendar does. When your colleague asks on a Friday whether the shipment will make the promotion, you should be reaching for one sheet with real numbers on it rather than assembling the answer from four systems under pressure.

Stripped of everything else, this week is a road problem, and I keep coming back to that. The composite index falling 1% to $4,473 is a story about what carriers are charging. The Shanghai queue going from 35 hours to 96 hours is a story about whether the road is open. You can negotiate all day with a ferry company about the ticket price. If the ferry is not running, you are standing on the bank with your boxes and there is nothing clever left to do, and you will wish you had priced the crossing upstream when nobody else was standing in line for it. Changing a tyre at night with a bad jack is not glamorous work either, but it is the work, and the people who plan it in daylight get home earlier.

Do not read me as saying this week is a crisis. It is not. A ship waiting four days at Shanghai is an ordinary bad month in this business, and there have been far worse and there will be again. What separates an ordinary bad month from a genuinely expensive one is almost never the rate somebody managed to negotiate. It is whether anybody noticed, early enough, that reliance on one doorway had become a dependency, and whether the second doorway had been priced before it was needed. This line I have walked, and the expensive failures always arrived on a lane where somebody had decided there was only one road.

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— By Ömer Kaya