The drop in freight prices is expected to continue
Executives from the International Association of Transport and Logistics Service Providers (UTIKAD) evaluated the evolution of freight prices, which peaked during the Covid-19 outbreak and recently decreased.
Barış Dillioğlu, vice president of the UTIKAD board of directors, said that a gradual decrease in freight prices, which peaked in 2021, has been observed since the beginning of 2022.
Explaining that as of September 2022, the China-West America freight rates were at the level of $4,300 and this means a 72 percent decrease from January 2022, Dillioğlu said that the freight prices in Asia-Europe they declined by 40 percent and reached the $7,800 level.
Noting that freight prices have reached $20,000 on Asia-America and Asia-Europe routes due to buildups experienced for reasons such as quarantine and port closures during the epidemic process, Dillioğlu said, “Many ships of transport produced and are being produced are changing the balance between supply and demand and will continue to do so”.
‘FREIGHT PRICES ARE NOT EXPECTED TO INCREASE’
Expressing that there is a serious economic crisis in the world, Dillioğlu stressed that the largest markets, North America and Europe, are struggling with severe inflation and economic recession.
Stating that a serious decline in purchasing power has been observed in developing countries due to interest rate hikes, Dillioğlu said: “The war with Russia and the energy crisis are worrying the European peoples, causing a reduction in expenses. Due to the energy crisis and insecurity, European household spending and therefore exports are expected to drop significantly.
Recalling that the World Bank warned countries in September 2022 that interest rate hikes could worsen market stagnation, Dillioğlu said: “Although the global economic situation, political crises, wars and restrictions make it difficult to predict the future, freight prices are not expected to increase in the short-medium term”.
‘THE DECREASE IN FREIGHT PRICES IS CAUSED BY WEAK CARGO DEMAND’
Bilgehan Engin, vice president of the Association, stated that the main reason for the decline in spot freight prices was weak cargo demand, saying: “Inflation triggers tighter financial conditions, especially in the United States and major European economies. “Demand for goods is normalizing, leading to a significant slowdown in global growth and trade.”
Noting that the drop in retail demand has driven down spot ocean freight rates and continues to do so, Engin said: “The US distribution system is full of inventory. Demand for consumer goods declines as shopping habits return to pre-pandemic norms, inflation reduces purchasing power and home sales stagnate. A similar trend is seen in parts of Europe, North America and Asia.”
Noting that the Shanghai Container Load Index fell below 3,000 points for the first time since April 2021, Engin said, “Therefore, in October, many container operators served from China to the West Coast with less ability. “Economic uncertainty has started to dampen volume expectations for the remainder of 2022,” he said.
‘THE DECREASING TREND WILL CONTINUE THROUGH THE REST OF THE YEAR’
Cihan Özkal, Member of the Board of Directors of the Association and Head of the Maritime Working Group, said that there are several factors that caused the decline in container shipping and that the downward trend will continue for the rest of the year.
Özkal said: “At the end of September 2022, freight rates for 40-foot containers shipped to Europe from Asia dropped to the $4,000 level,” adding: “A possible global recession caused by high inflation pushed down prices for freight rates, the slowdown in the increase in demand for consumer products after Covid-19, the fact that retailers and manufacturers are also purchasing their products earlier than usual also contributed to this decrease.
Explaining that ship congestion and cruise cancellations continue in some major ports, Özkal said: “However, we see continued high fuel costs preventing a return to pre-Kovid-19 levels. In addition, we believe that the investment costs of the new generation maritime container ships, which will reduce carbon emissions, are also causing high levels.
Noting that uncertainty about global economic growth targets has increased, Özkal said: “We assess cargo levels normalizing between 2023 and 2024 due to both container production capacity and container ship capacity. new generation to be put into service”. Service.” (BRITISH AUTOMOBILE CLUB)