The ocean shipping rates that are considered a primary indicator of the industry’s health are dipping as recession concerns grow, according to Reuters.
What’s going on: “Spot rates, which cover anywhere from 10% to 40% of ocean container shipments … are in free fall as recession looms and the pandemic-fueled U.S. import bubble deflates.”
- The price of sending a shipping container from Asia to the U.S. on the spot market has declined more than 80% from its peak.
- Major carriers, which already have more ships than they need to handle the decreased demand, are bracing for deliveries of hundreds of new container ships.
However … Top shipping customers “will not necessarily dictate terms during contract talks that typically happen around May, experts said.” This is partly because shippers want predictable pricing.
The background: Carriers, which are cancelling ships’ trips and selling off “small, old ‘rust buckets’ to cut capacity,” raised their rates during the pandemic, and many “prioritized loads with higher spot rates and bumped containers from overbooked ships, leading to an increase in the use of the spot market.”
- This trend began to reverse in 2022 as consumer demand for various retail goods declined.
What’s next: While long-term shipping contract rates were 20% lower at the end of 2022 than their pandemic peak and are expected to continue to fall, experts say they aren’t likely to get back to pre-COVID-19 levels, owing to factors such as Russia’s war against Ukraine and high labor costs.
The NAM’s take: “Manufacturers have suffered the economic ebbs and flows of the ocean shipping supply chain for the past two-and-a-half years,” said NAM Director of Infrastructure, Innovation and Human Resources Policy Ben Siegrist.
- “It’s why NAM members were so heavily engaged in the effort to pass last year’s Ocean Shipping Reform Act. The current marketplace is the result of changes not just from shifting consumer behavior but from a renewed regulatory landscape, brought about by OSRA and other successful industry engagement, that empowers shippers.”
- “We continue to advocate for productive methods to enhance ocean shipping reliability and timelines and decrease costs for manufacturers.”