Though still soaring vis-a-vis pre-pandemic, container freight rates take a plunge

According to Jonathan Roach who is a container shipping analyst at Braemar, the pandemic led surge in ocean freight charges has peaked. This means a downfall in the container freight rates globally, even though still soaring when compared to the pre-pandemic levels. Along all major routes, this much needed plunge may indicate a potential sign of easing inflation pressures and alleviated supply chain logjams.

Data from Freightos shows the cost to ship a 40-feet container from China to the U.S. West Coast is around $4,300, down almost 72% from mid-January. Similarly, a container shipped from Asia to Europe costs around $7,800, 40% less than at the start of the year. Both are key container freight routes which suffered the wrath of unprecedented container freight rates.

We’re not expecting rates to surge next year. They’re going to probably fall down towards pre-pandemic levels, maybe slightly higher for the additional levies [that] will be charged for cleaner shipping,”

Johnathan Roach

Moving a container from China to the U.S. or Europe last year would mean shelling around $20,000 due to supply-chain disruptions, port backlogs, and a surge in cargo. Shippers, therefore, had to shift the cargo to the ports in the Atlantic and Gulf of Mexico, hoping to avoid the congestion on the West Coast ports. The port of New York and New Jersey have seen rise of 34% in cargo volume compared to pre-pandemic levels. But the congestion shifted along the freight.

Owing to the inflationary pressures consumers are pulling back, leading to a delay in restocking needs. Further this decreases the demand for ocean shipping and thus, the prices. Also, since many large importers, over the last couple of years, decided to charter their own vessels instead of waiting for ocean carriers, what should have been the peak shipping season is not so much at the ‘peak’ right now.

Roach also hinted at the deployment of new ships during the consecutive year. As a result of the heavy profits earned in the last couple of years, most shipping companies have invested in expansion of their fleet.

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