Cargo Rates Decline but Logistics Delays Linger

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Industries relying on ocean freight for the bulk of their shipments continue to see decreasing prices in both the transatlantic and transpacific shipping lanes. Although prices remain higher than last year, cargo marketplace Freightos reports a steady decline in ocean container rates.

This is not an indication that global logistics problems are sorted out. A now-averted U.S. rail workers strike threatened to make East Coast port congestion even worse and create backlogs across the country. Shippers are cancelling some sailings because demand for ocean freight is declining.

The supply chain is still grappling with challenges posed by growing wait times for ships arriving at the Gulf and East Coast ports coupled with increasing import volumes, despite high fuel costs and inflation, according to the Descartes Datamyne trade, import and export databases.

“While down slightly from August 2021 and July 2022, the August numbers show that the U.S. economy, inflation and high fuel costs still have not had the anticipated adverse effect on container import volume,” said Chris Jones, EVP, industry and services at Descartes. “The continued shift from West Coast ports and higher overall volumes are lengthening delays at major East and Gulf Coast ports and keeping the number of ships waiting on the water high, which will prolong the unpredictable nature of global supply chain performance.”

In response to easing demand and falling rates, carriers are canceling some transpacific sailings through October, Freightos reports. And as spot rates are now well below most contract rates, there are reports that many importers are trying to renegotiate ocean contracts with carriers.

The latest National Retail Federation data show that monthly import volumes have indeed declined each month since May and estimate that the gradual slide will continue through the end of the year, representing a 2 percent to 5 percent decrease compared to last year for each of these remaining months.

But even with these decreases, projected volumes for each month from September to December are at least 12 percent higher than in 2019, and total import volumes for 2022 would surpass 2021 by 1.2 percent and set a new annual record.

Another indication of an ocean market in flux is the recent rate decrease on the transatlantic. This lane had been anomalous – climbing early this year as Asia – Europe rates fell, and staying elevated this summer as transpacific prices sagged, said Freightos. But since the start of the month Europe – North America rates have fallen nearly 20 percent.

This dip could reflect the impact of the broader market forces that are pushing down demand on other lanes finally reaching this lane too. But, with transatlantic spot rates now significantly higher than Asia – U.S. West Coast prices ($6,800/FEU vs. $3,900/FEU), and a surplus of West Coast capacity as demand drops and congestion eases there, some of this month’s transatlantic decrease could be due to carriers shifting some capacity to this more lucrative lane.

Aside from the macroeconomic forces at play pushing prices down and reducing congestion in some areas, weather, like the latest typhoon that will shut down ports at Shanghai and Ningbo, and labor issues are still potential disruptors to this recovery, Freightos added.

Asia-U.S. ocean freight rates:

• Asia-U.S. West Coast prices (FBX01 Daily) fell 10 percent to $3,896/FEU. This rate is 80 percent lower than the same time last year.
• Asia-U.S. East Coast prices (FBX03 Daily) dipped 2 percent to $8,553/FEU and are 61 percent lower than rates for this week last year.