The Four Reasons Behind Unprecedentedly High Sea Freight Rates

In recent months, import prices for sea freight from China to Europe have skyrocketed to historic highs. The Freight Heroanalyzes the underlying causes and raises the question: are shipping lines acting responsibly in this situation?

Absurd Situation

December 2020 was already an extraordinary month in global logistics. And what many had anticipated was confirmed in January 2021: sea freight rates for containers from China to Europe continued to rise. Many Dutch trading companies decided to postpone planned imports from Asia—at least until after the Chinese New Year celebrations. But is it realistic to expect that rates will drop quickly after Chinese New Year?

Here are the four main reasons behind the current record-high freight rates from China to the Netherlands:

Reason 1: The Pandemic – From Low Demand to Inventory Replenishment

More than a year ago, Europe and the U.S. began experiencing the effects of the COVID-19 outbreak in China. Factory closures and production halts forced hundreds of sailings to be canceled. Dutch industry and retailers faced major supply chain disruptions. Meanwhile, the few ships still sailing left ports with significantly less cargo, as goods ready for export to China were sitting idle in Europe. Vessel utilization dropped to as low as 50%. Shipping lines were no longer profitable, and freight rates fell by roughly 30%.

The Chinese New Year holiday in 2020 was extended, and most factories remained closed even afterward. The few that reopened operated at half capacity. Full production resumed in March 2020 to quickly eliminate supply backlogs. While Europe was hit by its own COVID wave, consumer confidence held steady, and e-commerce surged—even among older generations. Retailers replenished inventory rapidly, and the demand for container transport skyrocketed—coinciding with the usual Q3 peak season. Freight rates, which had previously dropped, shot up by nearly 150% in a short time, and several decommissioned vessels were reactivated.

Reason 2: Container Shortages

Because the highest freight rates could be achieved on routes to the U.S., many Asian freight forwarders allocated most available containers to those routes. At the same time, container exports from the U.S. to China were heavily constrained due to the severe pandemic impact. Many factories and warehouses in the U.S. were closed or operating at limited capacity, resulting in delayed return of empty containers to China. A massive container shortage in China became apparent shortly after the autumn season. Although the Chinese Ministry of Commerce announced a ramp-up in new container production in December, the shortage remains critical.

Reason 3: Late Chinese New Year in 2021

With Chinese New Year falling on February 12, 2021, production in China remained at full throttle through early February. The demand for container transport peaked just one week before the start of the holiday.

Reason 4: Are Shipping Lines Exploiting the Situation?

The exceptionally high freight rates have caused immense frustration among Dutch shippers. Despite growing pressure to increase freight capacity, the opposite appears to be happening: some major shipping lines have imposed cargo stop policies. At the same time, already confirmed shipments are being canceled without warning and resold at higher rates to wealthier customers.

It’s becoming increasingly difficult to avoid the impression that carriers are exploiting a situation they helped create.