Spot freight rates extend drops amid signs of dipping demand
Spot freight rates on steady decline since March
Data shows a steady decline in transpacific spot freight rates, starting from March, when Shanghai began imposing lockdown measures to cope with the worst Covid-19 outbreak in two years.
According to the latest weekly assessment by Drewry, the composite index for global container spot rates decreased by 3% last week to $7,286 per 40 foot container. This was 10% lower than the same week in 2021 while it represented a cumulative decline of 23% from March.
The latest assessments also showed that Shanghai-Los Angeles rates were at $7,952 per 40 foot equivalent unit, down by 7% year-on-year and 5% month-on-month. Shanghai-New York rates were also down by 7% year-on-year at $10,403 per 40 foot container. This indicated a monthly drop of 5%.
Still no sign of pent-up demand after Shanghai reopening
The congestion at Shanghai ports has been easing gradually following a two-month lockdown, and another partial lockdown imposed on June 10. Ocean freight market analysts reported volumes began picking up again following the Shanghai reopening. However, analysts noted this recovery has yet to translate into a big surge of ships and containers in congested European and US ports, although earlier forecasts had called for a rise in freight rates upon the end of lockdowns.
This was largely attributed to uncertainties on a macro level, such as high inflation in global economies, dwindling consumer demand and a resulting slowdown in orders by major retailers.
How will reduced consumer demand affect freight conditions?
According to some analysts, this inflation-driven slowdown in consumer spending and the possibility of a global recession could be a harbinger of weaker conditions for freight carriers.
Despite some major carriers reducing shipping capacities and using blank sailings to maintain rate levels, weaker consumer demand could further push freight costs down. The analysts highlight increasing signs of inventory surpluses at major US retailers and Asian consumer electronics producers. As the retail industry is a key driver in freight rates, rising inventories can bring an improved availability in container space and further weakening in shipping costs, analysts argue.
Some volume projections for 2022 remain strong
However, global freight and shipping exports continue to advise caution for the third quarter, considering that this is the traditional peak. In addition to expectations of stronger volumes amid peak season, volumes still to come as Shanghai rebounds should also be monitored closely for the near-term.
The National Retail Federation said in its June report that they were expecting continued shipping capacity constraints and a likelihood of a recovery in freight rates from their recent declines. According to the report, despite demand headwinds stemming from anti-inflation policy measures, this year will be another “bumper year” for carriers, terminals and ports as the uptick in volumes from China is felt.
More free plastics newsPlastic resin (PP, LDPE, LLDPE ,HDPE, PVC, GPS; HIPS, PET, ABS) prices, polymer market trends, and more...
- PE markets remain bearish, but are competitive offers from US fading?
- Premium of Turkey and SE Asia over China nears pre-pandemic norms in PP markets
- Will Asian PVC markets move up to match Taiwanese Sept PVC pricing?
- Mid-Eastern PP, PE markets fall for fourth month running in August
- Asian styrene prices tumble, following in footsteps of crude
- What does China’s self-sufficiency mean for global PP markets?
- Asian PVC back to pre-pandemic price league; players question the bottom
- Stats: Turkey’s H1 2022 polymer imports surpass 3 million tons
- Global oil and petchem companies announce Q2 results
- STATS: China’s H1 polymer imports lowest since 2017, exports at a record-high