Container freight rates return to pre-Covid-19 levels

Freight prices on major sea trade routes continue to fall, driven by a glut of containers after high inflation dampened consumer demand and global supply chain woes eased with rising prices. inventories.

The Baltic Dry Index (BDI), known as the indicator of transport rates in the freight market and one of the main indicators of the global economy, was located at the beginning of the year at the level of 2,200 points, while it remained at the level of 1242 points as of November 24.

The value of the Freightos Baltic Global Container Index (Cost of 40-inch HC Container), which measures container freight rates on 12 major shipping lanes of world trade, was $9,293 at the beginning of this year, but fell below the $3,000 on November 24. .

Again, according to the index, the cost of containers from China to the US West Coast region fell more than 75 percent compared to January 2022, falling below $2,100. The cost of a container shipped from Asia to Europe fell by more than 60 percent to $4,300.

The World Container Index, prepared by the maritime consultancy Drewry, also continues to decline for 39 consecutive weeks. While the index fell 7 percent this week, the spot freight price for 40 containers was determined at $2,404 on November 24.

This is approximately 77% below the peak of $10,377 seen in September 2021 and 36% below the 5-year average of $3,768. Since the beginning of the year, the median price has been $6,826.

EXPECTED SUPPLY

Globally, more than 90 percent of all goods are transported by ship, which is why container shipping is considered the lifeblood of global trade.

With the Covid-19 epidemic, the “empty container crisis” began on the maritime route, where approximately 90 percent of world trade was carried out. First of all, increases in freight prices (ship freight), which began in the Far Eastern, American and European markets, were felt almost throughout the world.

Freight prices doubled by 10 in the mentioned period due to the lack of containers and it became difficult to find containers. Freight prices on the Far East-Europe line, which before Covid-19 were at the $2,000 level, were based on $20,000.

Above all because the ships that came from China to the USA could not unload their cargo, they could not return in a short time and this deepened the supply problem. Especially in the US and China, hundreds of container ships were waiting in line to reach the ports.

Many industrialists, from automotive to consumables, from textiles to furniture, could not deliver their orders on time due to logistical problems, and had to delay or reduce their production because the distribution of intermediate goods could not be carried out on time.

While there was a container shortage at the height of the Covid-19 pandemic, the global economy is now facing the opposite problem of “excess capacity” as demand plummets.

As global consumer demand plummets, container warehouses are filling up, while the oversupply of cargo space in the shipping industry is increasing.

Experts expect a huge oversupply of shipping from 2023 and 2024, after the bottlenecks experienced during the epidemic period.

Experts, first of all, see the change in consumer spending as the reason for the drop in container demand, while a possible global recession caused by high inflation caused by the Russia-Ukraine war and the crisis energy has lowered freight prices.

He stated that the slowdown in the increase in demand for consumer products after Covid-19, the high costs of energy and the fact that retailers and manufacturers supply their products earlier than usual contributed to this decline.

INCREASES IN EXTRA CAPACITY IN MARITIME TRANSPORTATION

Lothar Thoma, Member of the Board of Directors and General Manager of Air and Sea Freight at Gebrüder Weiss, an Austria-based international freight and logistics company, said that after the bottlenecks of recent months, excess capacity in shipping is increasing. again.

Stating that freight rates have decreased significantly in recent weeks and have already returned to the “pre-coronavirus level”, Thoma said: “This is mainly due to the cooling of the global economy, triggered by the Ukraine war and the crisis energetic. The recession leads to a decline in transportation demand, which is met by excess cargo space.

The good news is that supply chains are becoming more predictable and reliable again. The delays and unpredictability that have made life difficult for us and our customers over the past two years have been resolved. There are no ships left waiting to be unloaded in the ports. Freight rates are likely to remain at these lows unless the global economy recovers.” made his assessment. (AA)