The unprecedented COVID pandemic-led boom in ocean freight pricing seems to have peaked and rates are now on a downward trend, against the backdrop of a potential global recession, driven by surging energy prices and rapid inflation. The boom in demand for consumer products has also calmed, as spending on travel, leisure and services made a strong revival this past year. Due to this boom, freight rates jumped roughly 10-fold in 2021. At the same time, supply chain disruptions, port backlogs and sheer cargo volumes left importers scrambling for space on container ships.
After the chaos of 2021, retailers tried to seize the moment and anticipate uncertainty by importing more goods earlier than usual – except this year, there were no delays and the demand for consumer goods did not materialize. Many importers are now dealing with overstock and have curtailed further purchasing.
Analysts see shipping rates falling further for the remainder of the year and through next year, especially as new ships are deployed over the next two years. These new vessels are expected to result in an estimated net fleet growth of over 9% from 2023 to 2024. This increase in capacity, aside from putting downward pressure on rates, should also promote overall stability in the market, as the ability to ship cargo is less compromised than it has been recently.
While the downward trend in the ocean freight market seems evident, the air cargo sector remains chaotic and difficult to predict. Ongoing disruptions due to compromised staffing resources, the war in Ukraine, industrial action, natural disasters, reports of record inventory levels in the U.S., high inflation, and more COVID-related lockdowns in cities in China – the ‘factory of the world’ for so many products – promise more air cargo market volatility for the remainder of 2022.
In terms of rates, sluggish demand for air cargo since the start of this year is pushing down shipping costs. Airfreight rates increased steadily from 2019 to late 2021, however, since the start of 2022, an overall downward trend has been observed. That said, overall air cargo rates remain slightly higher than one year ago, and are still considerably higher than the 2019 pre-pandemic levels.
Despite continuing transportation and supply chain chaos, global air cargo capacity in August recovered 7% from the same period last year, thanks to the surge of international summer travels in the northern hemisphere. It also continued to narrow its recovery back to the market capacity level seen in 2019, now just 9% away.
For more information, contact David Lychek, Director – Ocean & Air Services.
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