Spot Rates Sink To Pre-Pandemic Levels

24 Nov Spot Rates Sink To Pre-Pandemic Levels

Ocean freight spot rates have fallen to levels not seen since before the COVID-19 pandemic. Whilst this decline in shipping costs might be perceived as positive news, it also reveals significant structural challenges and heightened competition that could potentially impact service reliability across global supply chains.

Around the world rates show a downward trend, which can be seen via various findings such as: the fall of several European routes to three-digit levels , the falling rates across trans-Pacific eastbound rates despite general rate increases (GRIs) by carriers, the largest single week drop (-14%) in the Shanghai Containerized Freight Index since 2016, as well as the fact many shipping companies’ rates are below breakeven point, particularly on routes like the U.S. West Coast.

This worldwide drop can be attributed to interconnecting factors such as overcapacity, new vessels, lower demand, an earlier peak season and trade policy repercussions.

Faced with these market conditions, shipping organisations have implemented several strategies including widespread blank sailings, suspended operations and the diversion of capacity to secondary trades to manage capacity.

Compounding this issue is the infrastructure challenge posed by ultra-large containerships (ULCs) which have the potential to overwhelm port infrastructure and result in bottlenecks in berth depth, crane reach and yard space.

This paradoxical situation where despite increased supply chain stress from trade policy uncertainty and conflict, container freight rates continue to fall, is anticipated to continue for the remainder of the year.

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