Freight Rates to Decline Further in 2022

Lockdowns in Shanghai and China are contributing to lower near-term demands and lower freight rates.

FREMONT, CA: Spot rates are falling in 2022 after a year in which they continued to reach record highs, with experts pointing to several reasons that are likely to contribute to a sustained reduction. Numerous experts wonder if rates have peaked as a result of the steady decline that started in January, even before the industry's big new construction activities start to provide the anticipated dramatic increases in capacity late in 2023 and beyond.

The customary post-Chinese New Year lean season has seen a sharp decline in freight rates in the last three months due to a decrease in sales and full inventories, a technology platform that aids shippers in planning and managing their supply chain. They found that between January and March 2022, trans-Pacific container spot rates between China and ports on the East and West coasts of the United States will be cut in half.

The trend is confirmed by the Drewry World Container Index, proving that the same dynamics are at work on a global scale. While rates are still up by more than two-thirds compared to a year ago, they reported that the worldwide spot rate average had decreased by about four percent for the week. The freight rates on transpacific routes fell for the fifth week in a row. Prices to the United States fell by anywhere between six and eight percent, while those to Europe fell by a smaller one to two percent. The Drewry World Container Index also shows that overall container shipping costs have decreased by nearly 12 percent over the past month.

While the U.S. is more affected by the reduction in spot freight prices brought on by lower volumes and inflation, Shifl China's offices also refer to recent COVID-19 lockdowns in important Chinese manufacturing hubs as another factor. China has been enacting a series of gradual lockdowns in various regions of the nation, with restrictions surrounding Ningbo beginning in 2022 after having an impact on northern ports in the latter half of 2021. Shanghai, which has the busiest container port in the world, is currently under the most major and alarming lockdown, which is also being prolonged.

The Chinese government and Shanghai International Port Group representatives assert that the port is still running normally despite rumours of escalating backlogs. According to a port official published by the official newspaper China Daily, there are currently just about 50 ships offshore, contrary to allegations that there are 300 or more. The port handled 396 vessels last week, which was close to its 400-vessel capacity. While there are signs that the number of sailings being cancelled and ships being redirected is increasing, certain shipping companies, like Maersk, are also saying that they have not yet cancelled any sailings. However, according to a calculation by Lloyd's Intelligence, as of April 4, 140 containerships are parked outside the ports of Shanghai and the neighbouring city of Ningbo.

Weekly Brief

Read Also