Omicron Spread Drives Shipping and Air Freight Rates to Record Highs... Concerns Over Performance Polarization

SCFI Index Surpasses 4700 for the First Time
TAC Hong Kong~North America Also Hits Record High
Domestic Exporters Face Increased Freight Costs

[Image source=Yonhap News]

As the year-end logistics crisis deepens due to the spread of the new COVID-19 variant Omicron, shipping and air cargo freight rates, which had stalled, have once again reached record highs. While major domestic shipping and air cargo transportation companies are expected to continue strong performance due to high freight rates, the freight burden on small and medium-sized export companies in Korea is expected to increase further.

According to the shipping industry on the 7th, the Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 container shipping routes, rose by 125.09 points from the previous week to 4,727.06 points. This is the first time since the related statistics began being compiled in October 2009 that the SCFI has surpassed 4,700 points.

The SCFI began to rise in line with the timing of Omicron’s global spread, first detected on November 11 last month in Botswana, southern Africa. In particular, freight rates on the major global export route to the U.S. West Coast hit a new high last week, rising $289 to $7,019.

According to the Korea Maritime Promotion Corporation’s market report, about 80 vessels are waiting to unload near major North American West Coast ports, including Los Angeles (LA) and Long Beach, with an estimated two-week wait for berthing. Due to the COVID-19 impact causing shortages of local port workers and land transportation personnel, combined with the adverse effects of Omicron, it is expected to take considerable time to normalize operations.

With worsening port congestion, air cargo transportation fees, an alternative shipping method, are also soaring. According to the TAC Index, a global air cargo transportation index, freight rates on the Hong Kong?North America route averaged $11.54 per kilogram last month, marking the highest level since statistics began in 2015. Especially, the freight rate increased by 14.04 points compared to October, indicating that high freight rates are likely to continue for the time being.

The industry expressed concerns that the rise in freight rates will exacerbate the polarization of management among domestic companies. While major domestic shipping and air cargo transportation companies are expected to continue record quarterly sales in the fourth quarter due to strong freight rates, operating margins for small and medium-sized export companies in Korea are shrinking.

An industry official said, "With the spread of the Omicron variant, air and shipping freight rates have ended their adjustment phase and turned upward," adding, "If logistics congestion prolongs, the upward trend in freight rates is expected to continue into early next year."

This content was produced with the assistance of AI translation services.