While shipping a forty-foot container from China to the US costs, on average, 80% more than it did at the start of the pandemic, rates have fallen by two-thirds in the third quarter, according to Freightos Baltic Index (FBX) and analysts expect them to continue falling.
Judah Levine, Head of Research with Freightos said that shipping container prices for routes between China and northern Europe began their decline in January and this is due to two main factors: the slashing of disposable incomes from higher inflation, and spending less on goods and more on services.
This has given the ports around the world a chance to catch up and unsnarl some supply chain tangles. However, experts reported that the last nine to twelve months was unchecked growth, some of the fastest on record, and now we’re paying for it. Or not paying, as consumers are cutting spending. Another supply chain bullwhip may be on the horizon with inflation still on the rise. Businesses will need to consider their inventory model, whether they’re using the Just-in-Time, or Just-in-Case methods to determine how much they want to have on hand, and placing their bets on what the holiday shopping season will bring to the table.
Niels Rasmussen, BIMCO’s Chief Shipping Analyst had this to say: “No matter the reason for the low volumes, at this level of volumes, the remaining congestion that has helped to prop-up the supply/demand balance should dissipate quickly. The liner operators will then be left with lower volumes than in 2019, a fleet that has grown 11.8% since then, an orderbook set to add 9.9% to the fleet in 2023, and poor prospects for the global economy. EEXI and CII regulations may absorb as much as 10% of the fleet in 2023, but unless the markets surprise positively, we must still expect to see numerous laid up ships or freight rates that continue to move quickly downwards, or both.”
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