By Mark Seavy

Ocean freight container spot rates continue to climb, raising concerns for suppliers and retailers as they prepare for holiday shipments.

The prices for 40-foot containers bound from China for the U.S. West Coast will hit an average of $6,700 in the next 10 days (with the high being $7,600), according to ocean and air freight analytics firm Xeneta. That is an increase from $4,200 in May and from $1,342 last October. On the U.S. East Coast, the average price will hit $7,600 (with a high of $8,700), Xeneta reported. This is up from $5,700 in April and $1,900 in January.

For those companies that locked in contracts at lower prices several weeks ago, shipping firms are likely to “roll” or delay their shipments to focus on contracts with higher rates—something that is not barred by the agreements, according to Xeneta. Moving forward, shipments are expected to peak between July and September as retailers gear up for the holiday season.

Even though the prices for 40-foot containers are increasing, it’s unlikely this will cause the level of chaos that ensued in 2021 and 2022 when rates topped $20,000 and deliveries were delayed for weeks. And there are not expected to be the number of backups at U.S. ports that were common three years ago as the trucking and freight lines that deliver goods from container ships to warehouses are clear of delays, licensing industry executives said.

Container prices, however, will continue to rise at a measured pace through Q4 before declining in the first half of 2025, said Xeneta, whose clients include Walmart, Amazon, Hasbro, and Mattel. And while about 60% of shipments were on contracts and 40% were at spot rates eight months ago, those numbers have flipped in recent weeks, according to the analytics platform.

“The timing and loading in and out of ports are manageable at this point and I don’t expect it to be problematic until maybe the last month or two of the season,” said Jay Foreman, CEO at licensed toy supplier Basic Fun. “The extra costs are going to get eaten by the importer. So, companies that bring in goods domestically and reship to retailers are going to take a hit. Seeing rates go from $3,000 to $7,500 in normal times would be earth shattering. But going through what we did in 2021 and 2022, it feels a little bit less horrible.”

Several factors have contributed to these price increases. Drought conditions in the Panama Canal lowered water levels and affected traffic, but that appears to be easing, licensing executive said. Additionally, many shipments have been hampered by political unrest in the Red Sea and Gulf of Aden, resulting in the need to reroute shipments. This has caused delivery delays of up to 10 days and additional fuel costs of as much as $1 million, according to shipping firm Maersk.

Despite these delays—many of which are expected to continue well into the second half of 2024—Maersk’s shipping volumes increased this year as a result of strong market demand, said Vincent Clerc, CEO at A.P. Moller-Maersk Group, the parent of the shipping subsidiary Maersk Line.

“We have seen rate increases on the back of strong market demand, which has exacerbated the very tight supply of containers as most of the global slack capacity has been absorbed in the longer sailing routes,” Clerc said. As additional containers become available in the second half, there will be a gradual decline in spot rates, he said.

Yet having seen shipping costs soar during the height of the pandemic, many licensees have adjusted to a new normal of shifting prices and retailers placing holiday orders earlier as a hedge against shipping issues, licensing executives said. Halloween orders that licensees once shipped to retailers in late June or early July have shifted back a month and the same holds true for holiday orders, which now ship to retailers in August.

“Ever since Covid hit, customers order product much earlier than they used to and that has become the standard operating procedure,” said Matthew Kavet, CEO at licensed drink and candy tin supplier Boston America. “Retailers used to order later and then 2021 hit and, moving forward, they have been proactive and ordered earlier.”