Global freight rates have recently seen a decline, sparking hope among buyers, even as shipping lines continue to grapple with issues like overcapacity and below-cost rates.
costs peaked in late 2022. Now, buyers will soon see relief from the historic highs of the COVID-induced ocean freight-feeding frenzy. Indeed, few will shed a tear to learn that many shipping lines continue to contend with container spot rates that are below cost. They may even view them as “payback” for the massive profits made in the preceding three years. However, as rates on many routes have dropped even below pre-pandemic levels, it’s unlikely that such generosity will endure.
During Q2, rates on the trans-Pacific Asia-to-U.S. routes were already rebounding. This month, they saw double-digit percentage increases, though these were admittedly from a low base. Volumes also increased slightly. Still, most of the improvement followed lines shifting capacity to the Europe-North America service earlier this year. More recently, these companies also began canceling sailings to manage overcapacity.
New vessel deliveries only exacerbated the situation, increasing global logistics capacity as demand faltered. By mid-August, rates were half of those seen before the pandemic. While lines continued to reduce capacity this summer, it will take time for rates to recover. Currently, contract rates exceed spot rates, and shipping lines might need to renegotiate contract rates mid-term to maintain volumes.
Meanwhile, the Europe-to-U.S. Atlantic market remains feeble, and rates will likely stay low through Q4. This is enough to cause anxiety in the hearts of procurement professionals nationwide. However, there are indications of a recovery here, too, as various capacity management efforts from lines have begun yielding results. Contract rates in the latter months of 2024 may prove to be a wiser choice for shippers than in 2023, when those under contract consistently lost out to the spot market.
Danmark Seneste Nyt, Danmark Overskrifter
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