The Comedown: Freight Pricing caught in Global Turbulence
Pre-pandemic, the average global price to ship a container hovered around $1,500. By the end of 2020, prices began to skyrocket, peaking that September at over seven times that amount. Today, a significant course correction is underway, leaving us with some important questions.
Earlier this year, pricing reached an inflection point. Many supply chain bottlenecks began to ease, leaving companies who loaded their shipping pipelines suddenly well-stocked. With that reduction in demand and other factors, including the war in Ukraine and global recession fears, ocean freight prices began to drop. According to the Freightos Baltic Index, the average global price to ship a container now sits below $4,000.
Will we see pre-pandemic pricing again?
One interesting factor to consider is that, with the consolidation of the ocean freight industry that was taking place long before the pandemic, the steamship lines have more leverage in the market. With that pricing power, it seems unlikely we’ll see $1,500 per container anytime soon. When prices began to slide significantly in the last few months, many carriers began blanking – or reducing available capacity through canceling sailings – in their trans-pacific lanes. To date, this practice hasn’t stopped the price drop. However, those efforts may ultimately prop up rates once the market levels off.
How has all of this affected Air Freight?
Looking at Air Freight is always a little more complicated. Air Freight became more attractive as ocean prices and timelines began to surge during the pandemic. However, it didn’t take long for this pipeline to start clogging as well, and air freight prices also began climbing. While downward pricing trends are appearing, air pricing is harder to track and explain. Prices are notably different lane-by-lane, with countless factors intervening, such as geopolitical issues, carrier fleets and equipment, capacity, and long national holidays. As a result, predictions here will be hard to come by until the ocean freight market stabilizes.
Is this a good time to ship my goods?
Absolutely. While industry demand overall has decreased, many shippers are taking this opportunity to increase their volumes. Rates and wait times are the lowest they’ve been in over two years, and there’s no guarantee they will stay that way.