Shipping peak season 2022: what is happening now

Shipping peak season 2022: what is happening now

Since the beginning of the coronavirus pandemic, freight transport, like many other areas of life, has repeatedly experienced disruptions. Where price and shipping times were once largely predictable, volatility has become the driving force.

What’s going on?

This volatility has primarily meant a steady rise in prices. But with peak shipping season, prices drop. That’s why PartnerTrade gives the 2022 peak season data and what to expect in the coming months so that you know the shipping situation.

Prices drop during the 2022 peak shipping season

Global freight and supply chains have experienced massive disruptions over the past two-and-a-half years:

  • Blackouts in China and severe restrictions on air travel have led to supply shortages.
  • As people started buying household goods, a surge in demand for goods led to a spike in freight prices and congestion.
  • A lack of empty containers began as companies struggled to keep up with demand, which continued to raise rates and increase delays.
  • Blocking the Suez Canal led to longer delays and higher prices.
  • The outbreak of COVID-19 in Yantian and the subsequent closure of the port reduced the cargo supply.
  • The 2021 peak season brought an unprecedented surge in prices.
  • The war in Ukraine raised energy costs.
  • Quarantines in Shanghai again reduced the supply of goods.

Since the surge in consumer demand in the summer of 2020, the industry has yet to return to pre-pandemic conditions but has faced ongoing crises that have led to and exacerbated skyrocketing prices, delays, and congestion.

We are currently experiencing overstocking. Less demand for goods means less freight, which leads to lower prices.

Orders are made in advance. Orders shipped before peak season mean lower peak season volume. In addition to lower demand, due to last year’s prohibitively high prices during the peak season, many businesses shipped their goods early this year.

These factors – reduced demand and early orders shipping – contribute to the relatively low prices.

Demand falls, but congestion persists

One of the supply chain issues of the past few years has been delays caused by congestion. Major ports are facing the postponement of dozens of ships, whereas in pre-pandemic periods, only one or two could be waiting, even in the height of the season.

This is particularly evident at the Port of Los Angeles/Long Beach, and although the situation has improved, congestion persists. They have also spread to other ports in the country as importers try to move their goods to less crowded ports.

Only a reduction in consumer demand for goods would reduce congestion. And yet – it didn’t happen.

Because of excess inventory, the drop in demand has led to more congestion than ever, at least in the short term. As new stock arrives before old inventory runs out, warehouses need more space. Containers continue to clog ports while they wait for somewhere to go.

Thus, some demand reduction creates more congestion.

Contract rates are high even as spot rates are falling

Although known as non-binding, freight contracts have long been popular with large companies to secure space for their goods. Contract rates haven’t fallen as much as spot rates over the past few months – they’ve been rising.

Why don’t businesses abandon contracts for cheaper spot rates?

The answer is that since capacity is still so limited and uncertain, contracts are still a more reliable way to ensure that goods arrive on time.

However, index-linking and freight futures have provided excellent contract reliability.

So what’s next?

There has yet to be a clear answer regarding where global freight rates will go in the coming months. But here are some ideas to consider.

First, despite rising inventories, it is still being determined whether demand is as low as it seems. Data on retail trade and imports for this year show that imports and sales did not decrease significantly.

With high demand and congestion persisting, we likely will see nothing too dramatic in the coming months. The rates may come down, but since they are starting from a very high place, they are likely to stay high.

Therefore, if you are interested in current freight rates, PartnerTrade will help you calculate a complete estimate for shipping your cargo, including all additional services you need. 

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