Freight costs are easing. While still not back to pre-pandemic levels, today’s costs are starting to reflect the impact of rapid inflation on consumer demand.
As of last week, the cost to ship a 40-foot container from China to the US West Coast is down 68% at $4,797 from $14,977 in January, according to data from the Freightos Baltic Index (FBX). The same size container peaked at over $20,000 in September last year.
This year’s pricing trend shows a significant reversal of last year’s rates. 2021 rates surged as importers fought for container space to cope with supply-chain disruptions, port backlogs, and a surge of cargo from the pandemic boom in consumer demand.
Retailers, after the chaos of 2021, tried to seize the moment and anticipate uncertainty by importing more goods earlier than usual — except, this year, there were no delays and the demand for consumer goods did not materialize. Importers are now left to deal with overstock.
“The backdrop of a potential global recession, driven by surging energy prices and rapid inflation, is driving down the market. The pandemic boom in demand for consumer products has calmed and spending on travel, leisure, and services made a revival in 2021,” Jonathan Roach, a container shipping analyst at London-based Braemar, told the Wall Street Journal.
Analysts see shipping rates falling further for the remainder of the year and through next year, especially as, according to shipowners, new ships will be deployed over the next two years, with an estimated net fleet growth of over 9% from 2023 to 2024.
Information for this briefing was found via the FBX, WSJ, and the sources and companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
