The cost of cargo ocean freight from Asia to America has halved from the beginning of 2022. It was partly influenced by eliminating congestion in the logistics chain, inflation, and a drop in consumer demand.
Lowering the level of prices for shipping
Freight rates on the main China-USA route decreased under certain factors. What were the reasons for the change in market prices – PartnerTrade decided to clarify.
Shipping containers from Shanghai to the US West Coast fell to $3,959 in early September, down 23% from the last week of August. Rates fell by about $1,000, the most significant drop since 2009.
Ocean freight rates from China to the States are a sample of global freight rates, so prices elsewhere have also dropped. Shipments from Shanghai to the port of Rotterdam and EU countries fell by 45% from the beginning of 2022.
The Global Supply Chain Disruption Index also improved. Thus, according to the Federal Reserve System (Fed) of New York, the pressure in logistics is now at the lowest level compared to January 2021.
Factors influencing cost reduction
The movement of container freight transport is restored, and the congestion observed during the coronavirus pandemic is decreasing.
Eliminating congestion in America’s major ports
Congestion of container ships at the ports of LA and NY, which began at the end of 2020 due to quarantine restrictions, increased cargo flow and disruptions in the ports, radically changed the estimate for ocean transportation.
Ship freight on the China-USA route and from Asia to Europe in the fall of 2021 reached $20,000. Moreover, the situation affected not only the price but also the terms of transportation. Shipping dates have shifted significantly, and the number of available ships has decreased.
After eliminating problems in the supply chain by moving cargo to less busy ports, the number of ships waiting to unload in Los Angeles and New York decreased from 100 to 10.
Changes in buyer behavior
The surge in consumer demand in 2021 and the limited supply of stores have led to shortages and high markups for many retailers and private sellers.
To avoid shortages and long delays at the port, large shippers started chartering ships in advance and loaded them with large quantities of products.
They filled warehouses by 200%, but demand fell – buyers began to save due to increased inflation, which also contributed to lower shipping prices.
Replenishment of the ocean fleet
The owners of the shipping companies, who received a considerable profit during the increased rates, decided to expand the fleet of vehicles.
New container ships will be put on the water, reducing transportation prices. The vessels are planning to launch on the routes within several years.
So, summing up all factors, experts predict a further drop in the level of rates without considering the markup in the form of additional fees.
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Cargo owners have loaded their warehouses to capacity, so they don’t need to ship goods often. In addition, West Coast ports have been relieved of congestion.
The shipping pace has slowed down. Buyers stopped showing active interest in products, and companies replenished stocks with goods that were in short supply.
Analysts predict a further decline in tariff plans for the transportation of containers during 2023.