Why Do Shipping Freight Rates Continue To Decline?

why do shipping freight rates continue to decline

Why do shipping freight rates continue to decline? Prices for shipping containers have been on a roller coaster ride over the past few years. After reaching record highs in 2021, prices have now fallen by two-thirds. So what’s driving these changes? Investors’ Chronicle reports that rates slowly began falling in the third quarter of 2022 and are expected to continue to drop. One factor is the increasing supply of containers, as new ships are being built and older ones are being retired. Find out what’s driving these declines in this article!

Does Offering Low Spot Rates Make Positive Results And Attract More Clients?

Shipping industries have come up with a way to attract more clients than ever—offering low spot rates. The bright side of the low spot rates is that customers are likely to save money on shipping. As a result, more and more companies are lowering their rates to attract more clients, and those who won’t budge on prices may lose packages because competitors offer better deals.

The Declining Of Spot Freight Rates From the Ports Of Both China and the US

According to the SHIFEX index, keeping an eye on the ocean spot freight rates displayed that a total of $1,825 came from freight rates for 40’ containers moving from China to the port of Los Angeles, which was equal to the season rates pre-pandemic.

“While the Fed has increased rates and inflation remains high, the fall in spot freight rates is expected to alleviate inflation. However, it remains to be seen whether the rates will stabilize at pre-pandemic levels or fall lower than that,” a quote from the CEO & Founder of Shifl, Shabsie Levy.

From the continuous queue of vessels outside East Coast ports, freight rates between China-US East Coast are declining. Additionally, the China-New York trade corridor fell to a rate of $5,550 coming from the freight rates for 40’ containers, which is still higher than the top season rate pre-pandemic.

Why do Shipping Freight Rates Continue To Decline?

Judah Levine, head of research at Freightos, said that the prices for shipping containers between China and Northern Europe started to decline in January. The main factors influencing this change are inflation and a shift in payment from goods to services.

Accordingly, because of the lower demand, the congestion issues that have affected most ports worldwide are also starting to relieve. In pre-pandemic, 3% of global container ships were held up because of this problem. Currently, 8% of vessels are affected by this, considering a certain drop from 14% in January 2022. Contract rates, on the other hand, are also in decline. Shipping data firm Xeneta’s index tracking recorded its highest month-on-month drop of 8% in October. The figure is still 64% higher than in January 2022.

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