15 Jan The Current State of Ocean Freight
As such, according to Freightos data, freight rates fell across the board in the final quarter of 2022 as per below:
- Asia – North America West Coast rates fell 42%
- Asia – North America East Coast rates fell 31%
- Asia – Europe rates fell 16%
- Transatlantic routes fell by 7%
2023: A snapshot
With these changing conditions across the supply chain landscape there is much discussion around the three main challenges of 2023: the slowdown of international trade and the global economy; the fall in container freight rates and the increased capacity via the large number of new ships being built.
Since the start of 2023, the Shanghai Containerised Freight Index (SCFI) has contracted by more than 2% from its highest point in early 2022, with the Asia-US west coast and Asia-Europe routes falling the most.
If the global economy cannot maintain the same pace of growth or capacity provided by the shipping industry, there is a likelihood that freight rates could further decrease.
Given there is no end in sight for inflation and the consequential tightening of monetary and fiscal policies by Governments, or a seeming resolution to the Russia-Ukraine war, consumer demand will most likely continue to flatten or at a minimum stay at its current subdued levels. Therefore indicating that a return to normal consumption, which is integral to the shipping industry, may prove elusive at this point in time.
What lies ahead?
Reduced demand, excess capacity and generally subdued economic conditions are placing rate pressure on carriers across trade routes across the globe.
Market indicators reflect the fact that trade volumes are sitting at or below pre-pandemic levels as importers, especially in Europe and North America, undergo an inventory correction.
Looking ahead it appears that 2023 may represent a challenging period for container carriers due to a cyclical downturn, which will simultaneously result in competitive price pressure between carriers.