After months of soaring freight rates, the shipping industry is finally seeing a downward trend in pricing, with steep falls over the past 12 months. This comes as a welcome relief to businesses and consumers who have been hit hard by the exorbitant costs of shipping goods around the world following the outbreak of the Covid-19 pandemic.The unprecedented demand for shipping services, coupled with a shortage of containers and ships, drove prices to record highs, leaving many struggling to stay af loat. But, with the global economy showing signs of recovery and supply chains slowly stabilising, there is hope that the worst of the shipping crisis may be behind us, according to Erik Devetak, chief product and data officer at Xeneta.“Several trade routes have been in the spotlight for a while now due to constant rate increases and record highs, followed by the steep fall over the past year,” he said. “However, the downward trend in rates is now showing signs of coming to an end.”Using the Far East Main to US West Coast trade route as an example, Devetak said since the start of 2023, long-term markets had stabilised in the low $2 000s for container rates based on contracts Xeneta had seen being signed. “We see that the carriers are trying to introduce an improved General Rate Increase (GRI), with a 20% to 30% GRI coming in from both CMA CGM and MSC, and other carriers seem to be following suit.”He said this was the first time in a while that this trend was being spotted. “The prices are not overshooting the long-term market and there seems to be an adjustment of sorts taking place in the short-term market. Carriers have given a lot of discounts over the last year, but they seem to have reached the position now where they are quite comfortable with the long-term rates.”He said carriers were seemingly happy and willing to sign the reduced rate long-term contracts due to their ability to then play more on the spot market to push those rates up. “This is especially interesting given that a lot of new longer-term contracts on the transpacific came into effect on May 1,” said market analyst Emily Stausbøll.According to the International Monetary Fund (IMF), the shock of the pandemic underscored just how crucial the maritime container trade was to the global economy, especially when container rates increased seven-fold.IMF data shows that shipping costs are an important driver of inf lation around the world: when freight rates double, inf lation picks up by about 0.7 percentage points.
