Amidst rising inflation and the ongoing conflict in Ukraine, reduced demand for sea freight is causing freight rates to soften. In reports published by key logistics companies, there were mixed results for the third quarter of 2022, with many showing a deceleration in growth due to the changing market conditions.
Why Were Shipping Rates Raised?
Freight rates hit record highs hit during the Covid-19 pandemic when global demand for goods far outstripped supply. According to Freightos Baltic Index, in September 2021, the average rate to secure a container on a ship from Asia to the United States hit $20,586, some fifteen times more than it was pre-pandemic.
During the pandemic, changes in consumer behaviour led to a sudden, unprecedented demand for goods as people were unable to spend their money on holidays and entertainment so turned to online shopping instead. This was good news for the economy but with demand for freight containers outstripping supply and only a small number of operators in the market, this soon led to soaring costs and never-seen-before shipping rates.
What’s Happening With Freight Rates Now?
Many of the major logistics companies have released results for 2022 Q3, showing a softening demand and slowed growth. For example, Kuehne & Nagel, a global logistics company saw gross profits rise by around 7%, however, volumes were down by 5%. Similarly, Danish logistics company DSV reported comparable results for the third quarter, with their revenue rising but sea freight volumes falling by 4%. CEO of DSV, Jens Anderson also predicted a further decline in both sea and air volumes ranging from 10-15% but said that they would strive to retain their volumes despite reduced demand.
What’s Behind the Reduced Demand?
With inflation hitting a 40-year high in the UK, consumers have been forced to once again, drastically alter their spending and buying behaviours. Facing increased costs of living, many people are having to think more carefully about how they spend their hard-earned money, with some households being forced to prioritise eating and heating above everything else. As a result of changing consumer behaviour, the demand for new goods is low, which in turn means that the demand for shipping containers is also lowering in response.
Even for consumers who aren’t on a strict budget and who may not be as affected by rising energy prices or grocery bills, the end of the pandemic has led to a shift in attitudes so they are spending less on products and more on experiences that they haven’t been able to enjoy during lockdowns, such as holidays, hobbies, socialising and entertainment.
Though some companies are benefiting financially from the lowering freight rates and supply chain costs, this about-turn in consumer habits has hit many businesses hard and some have even started Christmas sales early in an attempt to tempt buyers and improve sales figures.
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Here at Hawley Logistics, we have over 35 years of experience in offering cost-effective and reliable logistical services to our customers and we continue to do that today. With our strong focus on UK distribution, plus robust and extensive global networks, we’re able to offer fast, reliable delivery services throughout Europe and beyond.
If you’re looking for global freight services, such as Sea Freight, Air Freight, Road Freight or UK haulage services, then don’t hesitate to get in touch today to learn how we can help your business deliver. You can also call us on 01706 826322 or email info@hawleylogistics.co.uk. Alternatively, you can request a callback and one of the Hawley Logistics team will be in touch shortly to discuss your requirements.
