In the second quarter of 2026, the global ocean freight market experienced its most severe price surge since the pandemic. According to data from the Shanghai Shipping Exchange on June 18, the SCFI index rose for eight consecutive weeks, reaching 3,121.69 points, with a weekly gain of 4.57%. This rally erased all losses from the first quarter and hit a new year-to-date high. Meanwhile, the Suez Canal Authority announced that transit surcharges would increase by 12% for most vessel types, effective July 15.
For the struggling textile and apparel export sector, this cost shock could not have come at a worse time. China Customs data shows that textile and apparel exports grew only 0.1% year-on-year in the first five months, compared to an 11.8% increase in total merchandise exports. Textile companies are bearing the brunt of rising freight costs without enjoying the benefits of overall export growth.
Background
The current freight rally is not driven by a single factor. Although the Strait of Hormuz reopened after US-Iran negotiations, market expectations of a rate decline were dashed. The root cause lies in the worsening supply-demand imbalance on global routes: vessel diversions via the Cape of Good Hope due to the Red Sea crisis have reduced effective capacity, while Q2 restocking demand in Europe and the US, combined with tight capacity on South American and Australia-New Zealand routes, has driven up rates across the board.
The Suez Canal Authority's surcharge increase targets all vessel types, but its impact on textile trade is most pronounced for container ships and dry bulk carriers. Container ships will maintain a 12% surcharge, but dry bulk carriers see their surcharge jump from 10% to 22%. Since raw materials like cotton and chemical fibers are often shipped via dry bulk carriers, upstream cost pressures are likely to pass through to fabrics and garments.
Notably, Suez Canal traffic is recovering. Egypt's Central Agency for Public Mobilization and Statistics reported that the number of vessels transiting the canal in April 2026 rose 14% year-on-year, while revenue surged 27%. This gives the canal authority leverage to raise fees, and once raised, surcharges are unlikely to be reversed soon.
Industry Impact
By route, the US lane saw the steepest increases, with the West Coast rate jumping 11.41% week-on-week to $5,683/FEU, and the East Coast approaching $7,000. The US is China's largest textile and apparel export market, and these soaring costs directly compress exporters' profit margins. For a shirt with an FOB price of $20, an additional $1-2 in freight costs could halve the profit margin.
While European base port rates rose more modestly, the Mediterranean route has exceeded $4,260/TEU. Notably, the Santos, Brazil route hit $8,212/TEU, with a weekly gain of 8.18%, posing a serious challenge for companies expanding into Latin America. Among short-sea routes, the Korea lane jumped 16.8% in a single week, while Southeast Asia saw a slight increase and Japan remained flat—reflecting divergent supply-demand dynamics.
Further compounding the pain, several major shipping lines began imposing peak-season surcharges in June, with US-bound surcharges typically ranging from $1,000 to $1,500. This means that even if base rates stabilize, actual shipping costs will remain elevated.