November 2022 Global Trade – Market Update
It’s hard to believe that only nine months ago, global trade was struggling to keep pace with demand, and the carriers were able to charge freight rates that were often 10 x higher than pre-Covid levels. Everyone, primarily the consumer, witnessed the results as prices of all goods went up exponentially.
Fast forward, the market has softened, the demand for tonnage is dissolving, and the carriers are now offering spot rates (rates valid for 30 days) on the larger trade routes from Asia to the U.S. Historically, larger companies would lock in rates with the carriers for a longer term (1 year or more) to ensure stability in pricing, which helps with planning and budgeting.
Pricing has largely returned and is in the process of returning to its historical norms, primarily driven by a sharp slowdown in consumer confidence resulting in a decline in purchases.
The Ukraine conflict looms, and winter is coming creating a potential energy crisis. The Feds have yet to find an answer to inflation, and it’s likely we either are or will be in a recession soon. All of this impacts consumer confidence and, therefore, demand.
The container capacity is so widely available currently that the larger ocean container companies are canceling voyages to help minimize the sharp decline in freight rates and better align with a weakening market.
Current market conditions indicate that global ocean container demand will continue to trend downward, and we expect to see a continued decline of 4% or more this year.
With the exception of the carriers, everyone is happy to see the ocean rates stabilize to pre-pandemic levels. However, we have to keep in mind that the global market is still very volatile, and there are many factors at play that will continue to impact the market.