End of Record-Breaking Quarters as Freight Rates Show Steep Decline
The latest figures show a steep month-on-month decline in sea freight rates with negative import and export trends in all the major freight corridors. Data from the Xeneta Shipping Index (XSI) showed a drop in global rates for the third month in a row, with a 5.7% decrease in global rates in November, which is the largest monthly decline recorded by the XSI.
The Challenges Facing the Industry
Multiple factors are thought to have contributed to the steep decline in freight rates, including China’s continued zero-Covid policy, which means that much of the country is currently in lockdown. The ongoing economic uncertainty and weak consumer demand are also playing a huge role.
With many people across the globe facing a cost of living crisis, consumers are buying less which means lower volumes of freight. As a consequence, many carriers are now fighting for volume as demand for containers is lower than supply. This is a stark contrast to during the pandemic when the demand for consumer goods meant that air freight and sea freight rates soared.
The CEO of Xeneta said that the drop in long-term rates wasn’t a surprise but that the scale of the decline demonstrates the challenges the industry is facing.
Rates Remain Higher Than in 2021
The XSI figures appear to show a significant shift in the market, however, CEO Patrik Berglund points out that though the market is undeniably falling, it’s doing so from a great height. Overall global rates are still higher than they were this time last year, showing just how strong the position of carriers has been in for the past couple of years, though it’s clear this may now be coming to an end.
Predictions For the New Year
Declining freight rates are unlikely to slow in the near future, particularly since the predicted peak season for the US and Europe (i.e. the months leading up to Christmas) hasn’t had the impact it usually would, due to people buying less.
There are some plus points to the reduced demand, however, with port congestion easing and shippers choosing to use spare containers to store goods they don’t currently need due to the reduced demand.
Experts have predicted further falls in rates going into 2023 and tougher times to come for the global carrier community, though it isn’t clear yet what this might mean in real terms.
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