There has been an abrupt drop in global sea freight rates, with some areas seeing a reduction of as much as 50% in March. Digital freight forwarding platform, Shifl reported that rates between China and the US peaked in January and have been falling steadily since.
What Is Causing the Drop in Shipping Rates?
The falling shipping rates are likely to be a result of several factors, including a reduction in demand due to global economic factors, the continued Covid-19 pandemic and associated recent lockdowns in China, along with rising inflation in the US.
Shrinking global demand is thought to be the most significant factor in the reduction in shipping rates. Speaking to the Global Times, Zheng Jingwen of the Shangai International Shipping Research Centre, said: “Foreign trade last year was supported by booming orders for home appliances and anti-epidemic items, but the situation has eased.”
Further to this, US economic stimulus payments have also stopped and surging interest rates in the US have contributed further to the uncertainty. As has the war in Ukraine and the continued Covid-19 pandemic. In particular, the recent outbreaks of Coronavirus and strict lockdowns in Shanghai have impacted freight and the flow of goods.
However, industry insiders have suggested that the situation is likely to improve in the next quarter and noted that the Chinese government is already putting measures in place to protect supply chains from further disruption.
In an attempt to keep goods moving, as of April, shutdowns of highway services, port terminals, railway stations or airports in China without authorization have been strictly forbidden, along with stopping crew changes on international shipping services without proper authorisation. Many traders are already reporting a positive impact from these measures.
Future Predictions For Freight Rates
Industry insiders have pointed out that peak shipping season doesn’t normally get underway until May or June when many traders will see an influx of orders in anticipation of Christmas in just six months’ time.
This is a view upheld by Independent Shipping Industry Analyst, Wu Minghua, who told the Global Times that he was confident that there would be a positive change to foreign trade flows as a result of the Chinese government’s efforts and the anticipated rise in demand from the West.
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