Shipping Rates Lower as Supply Chain Improves - Sobel Network Shipping Co., Inc.

Shipping Rates Lower as Supply Chain Improves

The Ukraine War, China lockdowns, and the COVID-19 pandemic all drove prices high due to supply chain woes. However, things have started to subside with global trade. Many seethat ocean shipping is no longer in crisis mode. Shipping backlogs have finallystarted to ease.

In Germany, the shipping industry again seems to be under control and a bargaining deal was even achieved between the port authorities and dockworkers which helped alleviate things in the last half of the year. Martin Kroger, the chief executive of the German Shipowners Association (DR) stated that things are almost back to normal. He went on to talk about shipping capacity no longer being tight, “The backlogs of ships along European coasts have been overcome.”  Ocean freight prices are also starting to drop. “Shipping conditions are similar to what they were before the pandemic.”

Recently, the German business daily report Handelsblatt revealed data showing that shipping rates are finally down to pre-pandemic prices. A 20-foot container traveling from China to Northern Europe now costs $1,479 (€1,420) on average which is substantially less when compared with around $8,000 at the beginning of 2022.  In fact, the shipping container named ‘Shanghai’  that runs to theU.S. west coast has prices below those experienced in 2019.

Vincent Stamer of the Kiel Institute for the World Economy stated, “During the pandemic,

consumers in Europe and North America massively bought consumer electronics devices, furniture, and sports apparel, causing importers to hastily fill their inventories to meet the demand.”   Clearly, the boom is receding and so are the prices for goods.

Many believe that the US is close to experiencing a recession and that growth in Europe is also

faltering. . “Fears of rising inflation and an economic downturn are weighing on the demand for goods,” Stamer said, driving down the “need for shipping space and the level of freight rates” at the same time.

The reduction in global shipping rates will be felt with consumer goods as prices start to fall.

However, Martin Kroger disagrees and believes that the lower shipping costs will have very little impact on the prices paid by consumers. He believes that freight rates will not dip much lower. Not to mention the demand for greater environmental standards is going to cost most shipping companies a substantial amount of money which will be rolled on to consumers. He says the following, “Stringent new CO2 regulation imposed by the EU and aimed at gradually introducing fewer polluting fuels in shipping will increase our costs because they are much more expensive than the conventional fossil fuels we currently use.”