According to previous years, August to October is the peak season for the shipping industry, and the shipping costs are relatively high, especially in 2021. Because some major ports on the west coast of the United States were severely congested at that time, many goods could not be unloaded on time after arriving at the port. The result is very slow cargo turnaround cycles and escalating costs.
In 2022, this year is the exact opposite of last year. Compared with the peak period of last year, the sea freight price has dropped significantly this year, especially the freight rate of European and American lines has dropped significantly. The cost to ship a 40ft container from China to the U.S. West Coast is now about $5,400 a container, down 60% from January. According to the Freightos Baltic Index, a container shipped from Asia to Europe costs $9,000, down 42% from the start of the year. Freight rates on both routes, while still above pre-pandemic levels, peaked at more than $20,000 last September.
And what are the logical factors that have caused the continuous decline in ocean freight rates in Europe and the United States recently? Let's take a closer look below.
Global supply chains begin to recover
From 2020 to 2021, the major reason for the increase in freight rates is due to the serious situation of public health incidents in Europe and the United States, frequent lack of navigators on ships, lack of workers at ports, and strikes by truck drivers in some areas. Slow turnaround drives up costs accordingly. This year, with the loosening of control in Europe and the United States, the gradual recovery from production to logistics, the global supply chain is running relatively smoothly, the turnover rate of port cargo has increased significantly, and shipping costs have also fallen.
Energy supply in Europe and America is tight
Since March 2022, global energy prices have risen rapidly, and the prices of natural gas, oil, and electricity in Europe have all risen significantly. Energy costs for European residents have increased substantially, coupled with rapid price increases. The consumption power of many European residents has declined significantly, which has also led to a decline in global trade, and the utilization rate of shipping has declined compared with last year.
The global economic situation is worrying
According to data, the economic situation in the euro zone continued to decline, and manufacturing activities weakened further, especially the output of energy-intensive industries was greatly affected. In the absence of a significant improvement in the inflation problem, the activity related to the service industry has also accelerated its decline. At present, the economic fundamentals of Europe and the United States are gradually weakening, and the risk of economic recession is increasing. The transportation demand continued to be weak, the relationship between supply and demand weakened, and the market freight rate continued to adjust.
