Asia Trade Lane Price Drop
The contrast between the import rates from Asia in 2022 and those in 2023 is quite striking.
Just half a year ago, it was not unusual for ocean rates to be in the five-figure range.
However, presently, the shipping industry has become fiercely competitive with rates dropping even below the levels seen before the pandemic, especially for trans-Pacific movements.
The customary warnings regarding congestion, delays, worker shortages, and other such issues that were ubiquitous until recently have vanished almost instantly.
While the rates have gone down, the volume of shipments has also declined, but the logistics industry is still facing challenges.
US West Coast spot rates have now matched the levels seen before the pandemic.
The steamship lines are fiercely competing every day to provide the lowest rates.
While this is good news for US importers, it has led to the creation of artificial reduced capacity to prevent rates from falling too drastically.
The decline in volume has had a direct impact on the significant price drops, it is uncertain how much the rates will change, but a more stable and consistent rate structure is likely to emerge over the next few months.
East vs. West
The U.S. East Coast rates are also experiencing some noteworthy changes.
The rates for shipping from North Europe to the USEC have finally started to decrease after more than a year of being high
However, it is important to note that the freight cost is still three times more than the pre-pandemic levels.
Consequently, the demand for European imports has been increasing.
On the other hand, the trans-Atlantic westbound rates are encountering the long-term consequences of pandemic-driven modifications.
During the pandemic’s peak, to alleviate congestion in the Pacific, shippers moved to East Coast ports. However, with rates declining on the West Coast, there have been around 23% of cancelled sailings (in the last six weeks) for trans-Atlantic trade.
The effort to balance lower demand with greater availability is resulting in unstable and constantly shifting rates.
Carriers are anticipated to decrease capacity and introduce more blank sailings to alleviate the fluctuations that were a result of their own actions.
There is a relief in congestion fees and line haul rates for U.S. inbound services such as trucking and rail movements.
Congestion fees were implemented to help truckers manage the over-crowded conditions at ports and rail hubs, caused by COVID and the surge in imports, which resulted in delays of up to 3-4 hours beyond the usual waiting times.
These delays disrupted the logistics flow and generated expenses that had to be paid by someone.
The ripple effect of these delays impacted the entire logistics chain, from securing chassis to freeing up port space for staging.
Fortunately, as demand decreases, some congestion fees are disappearing, or drastically dropping, along with line haul rates.
However, fuel remains a major cost factor, with fuel service charges still relatively high, ranging from 35% to 55% of the total cost of the line haul.
Although some additional costs like congestion fees are reducing, trucking remains an expensive mode of shipping, and rates are not anticipated to decline significantly like ocean freight has.