Despite ongoing peace talks between the U.S. and Iran, global shipping and air freight rates are expected to remain elevated for the foreseeable future. However, uncertainty about how long this wartime boom will last has prompted logistics companies to cautiously begin strategizing for the future.
As of June 18, the Shanghai Container Freight Index (SCFI), a key profitability indicator for container shipping, surged to 3,121, more than doubling compared to the beginning of the year.
The freight index for Very Large Crude Carriers (VLCC) on the Middle East to East Asia route reached 439 as of June 17, marking a 9% increase from June 10, prior to the peace talks, and nearly double the rates seen at the end of February, just before the conflict escalated.
In addition to freight indices, charter rates for vessels are also on the rise. The daily charter rate for VLCCs of 270,000 tons or more was reported at $448,000 as of June 17. Although rates soared to $800,000 during the conflict, they remain more than double the pre-war levels.
The increase in logistics and energy transportation costs poses challenges for domestic companies heavily reliant on exports. Particularly for liquefied natural gas (LNG), if high freight rates persist through the second half of the year, there are concerns about soaring heating costs this winter. As of June 12, LNG shipping rates were around $80,000, nearly double the pre-war figures.
Rising ocean freight rates and high oil prices are also contributing to increased air freight costs. The Baltic Air Freight Index (BAI) stood at 2,715 as of June 15, up 34% from the same period last year. The logistics index for East Asia, particularly from Hong Kong, saw the largest increase at 42.2%.
The logistics industry anticipates that even with a peace agreement, elevated freight rates will persist for some time. This is due to the complex factors influencing costs, including fuel prices, war risk insurance, and various surcharges, which require time for adjustments on a quarterly basis.
With the won-dollar exchange rate remaining high and a preference for dollar transactions in the industry, logistics and air freight companies are expected to see continued growth through the second half of the year. A representative from Korea Ratings stated, "While individual performances among shipping companies will vary based on their main vessel types, good results are anticipated post-peace agreement due to the time lag in normalizing supply."
However, some industry experts express concern that the current high-profit environment may not be entirely welcome. The global shipping and air freight sectors have historically experienced cycles of short-term booms followed by prolonged downturns.
A shipping industry insider remarked, "The more money made during boom periods, the faster the fleet capacity expands, leading to intensified competition among global shipping companies. With the logistics boom lasting nearly five years due to the pandemic, the Houthi blockade in the Red Sea, and the U.S.-Iran conflict, the next downturn could be longer and harsher than ever."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.