Extra maritime container capacity is undermining the sector’s historically high freight rates as the global economy cools down from overheated pandemic panic-buying patterns, according to numbers from Xeneta, a Norwegian ocean and air freight rate benchmarking and market intelligence platform.
The trend is truest for ocean freight rates from North Europe to the U.S. East Coast, with both spot and long-term contracted prices falling by around 10% since the start of the year, Xeneta said today.
“We are all aware of the macroeconomic forces impacting global consumer demand and international freight volumes,” Peter Sand, chief analyst at Xeneta, said in a release. “That, and the easing congestion at ports, is pushing rates down across the board as carriers suddenly compete for business which, this time last year, was flooding through their doors.”
That price decline has pushed long-term rates below $6,000 per forty-foot equivalent unit (FEU), while spot rates are below $6,500 per FEU for the first time since December 2021. Prior to the New Year, this trade had withstood market forces with only “soft” rates declines, compared to the dramatic falls seen on other key ocean corridors since last summer.
Despite that drop, container shipping prices remain strong in a long-term context. “We shouldn’t lose sight of how historically strong prices are at present,” Sand said. “If we look back to January 2021 rates for both spot and long-term agreements for the trans-Atlantic fronthaul averaged around $2,000 per FEU, roughly a third of today’s prices. That demonstrates just how high this trade has been flying… but also how much room there is for further falls.”
The container market has also cooled on transpacific routes, where ocean rates were stable for six weeks before falling below 2019 levels in the last couple weeks, due to the absence of the typical mini-demand surge ahead of Lunar New Year, according to the Hong Kong-based freight booking platform Freightos.
Manufacturers and retailers typically put in a surge of orders before factories throughout Asia shut their doors in February to allow for massive commercial travel patterns during Lunar New Year celebrations. This year, observers will see the Year of the Rabbit begin on January 22 and end on February 9, 2024.
But just like on the Atlantic routes, Freightos agreed that maritime rates are so historically high that these drops look small in the greater view. For example, Asia to Northern Europe rates still remain above their 2019 levels despite falling demand and an 80% drop compared to a year ago, Freightos said. And prices on Asia to Mediterranean routes have remained at about the $4,000 per FEU level since early December, more than double the pre-pandemic norm.
