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Ocean Freight Rates: Inflation, Consumer Spending Move Maritime Market

It looks like importers and exporters are finally seeing ocean freight rates heading for calmer seas.

Drewry’s composite World Container Index (WCI) decreased 3 percent to $7,285.89 per 40-foot container or equivalent unit (FEU) for the week ended June 23 and was 10 percent lower than the same week in 2021. Drewry, a maritime consultancy and data tracker, said it expects the index to decrease slowly in the next few weeks.

“Ocean freight spot rates are continuing to drop fast,” said Shabsie Levy, CEO and founder of Shifl, a digital freight forwarding platform based in Suffern, N.Y. “The SHIFEX index shows China to the U.S. West Coast has gone below $7,000 per FEU, while China to the U.S. East Coast is moving downwards to below $9,000 per FEU. Consumer retail expenditure seems to be at a tipping point, inevitably reducing total volumes getting ashore. We expect this to push prices further down in the future.”

The average composite index of the WCI for year-to-date was reported at $8,475 per FEU, which was $5,006 higher than the five-year average of $3,469.

Freight rates on the critical Shanghai to Los Angeles route dropped 5 percent, or $426, to $7,952 per FEU. Spot rates on Shanghai-Genoa and Shanghai-New York each fell 3 percent to reach $11,129 and $10,403 per FEU, respectively.

Similarly, rates on Shanghai to Rotterdam, Holland, declined 2 percent, or $186, to $9,598 per FEU, while rates on Rotterdam to New York fell 1 percent, or $89, to $6,849 per FEU. However, rates on New York to Rotterdam grew 1 percent to $1,211 per FEU and rates on Los Angeles-Shanghai gained 2 percent to $1,265 per FEU, Drewry reported. Rates on Rotterdam to Shanghai hovered around the previous week’s level.

This followed the highest-ever monthly increase in long-term contracted ocean freight rates, according to the Xeneta Shipping Index, as the cost of locking in container shipments soared 30.1 percent. This meant that long-term rates were up 150.6 percent year-on-year.

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Levy said the drop in freight rates will go a long way in helping combat rising inflation. He noted that the issue of increased freight rates and inflation have been a major topic of discussion in the U.S. markets, including the efforts by the White House and Congress, which have been actively involved in trying to curb ocean freight prices including the recent passing the Ocean Shipping Reform Act of 2022 aimed at lowering the costs of everyday items and putting brakes on the high inflation rates.

“While long-term ocean freight prices remain higher than spot ocean freight prices, the situation may not last long,” Levy added. “When shippers realize spot prices continue to cascade, they could look to renegotiate their contracts with container lines. With import orders not staying strong in the middle of June…and the Chinese adamance to hold on to Covid Zero measures, [this] can result in uncertainty in import flows, negatively impacting freight prices over the course of this year.”