Are Freight Rates Dropping? A Comprehensive Look at the Global Shipping Landscape

Introduction

In the ever-evolving world of global logistics, one question remains at the forefront of shippers' minds: Are freight rates dropping? As we navigate through the complex landscape of international trade, it's crucial to understand the current trends and factors influencing freight rates. This article will provide an in-depth analysis of the freight market as of August 2024, examining various trade lanes and modes of transportation to give you a comprehensive picture of the shipping industry.

Ocean Freight: Transpacific Eastbound (TPEB) Market

The Transpacific Eastbound market continues to show strong volumes, surpassing last year's figures. However, several factors are influencing capacity and rates:

• Structural blank sailings due to Cape of Good Hope (COGH) routings
• Port congestion in Asia and North America
• Weather-related delays around the Cape of Good Hope

These factors have led to capacity challenges, particularly for shipments to the U.S. East Coast. On the other hand, the injection of extra loader (XL) space has eased some pressure on the U.S. West Coast, especially from China's main ports to the Pacific Southwest (PSW).

Floating Rates

We're observing a trend of shipping lines reducing rates for both East Coast and West Coast routes to balance supply and demand. However, there are efforts to stabilize rates for the second half of August, with some lines introducing early General Rate Increase (GRI) announcements.

Fixed Rates

Peak Season Surcharge (PSS) discussions are intensifying, as the gap between Freight All Kinds (FAK) rates and Named Account Contract (NAC) rates doesn't support mitigations, especially considering the potential GRI in August.

Ocean Freight: Far East Westbound (FEWB) Market

The Asia-Europe trade is experiencing its own set of challenges and developments:

• Improving port congestion in Asia
• Suboptimal on-time performance due to Cape of Good Hope reroutings
• Continued blank sailings in August
• Introduction of extra loaders to compensate for downsized vessels

Demand remains strong, with floating rates on the higher end. The Shanghai Containerized Freight Index (SCFI) has seen a slight drop over the past two weeks, but with blank sailings in place, the floating market is expected to remain critical.

Long-term named account space continues to be limited and restricted by carriers for space and equipment priority. While equipment shortages have improved since May and June, some Port of Loadings (POLs) with less direct calling may still face potential shortages for certain container types, such as 20'GPs.

Ocean Freight: Transatlantic Westbound (TAWB) Market

The Transatlantic Westbound market is showing varied trends across different regions:

North Europe

Carriers are beginning to notice the effects of reduced capacity due to full vessels. Demand remains stable, with some factories in the Northwest of the continent closed for July and August. Yang Ming Line has announced a GRI for September 1st, while Mediterranean Shipping Company and Ocean Network Express are considering applying a PSS in September. The intention is to halt rate deterioration.

Mediterranean

Congestion persists in the Mediterranean region, with average wait times of 4-7 days outside the main ports of Italy and Spain. Strikes at ports in Southern Italy have added pressure on certain services, with effects now being felt in the East Mediterranean, where rates are increasing. Carriers have already increased their rates for August, with no news about further increases in September.

We expect to see signs of the usual slack season in August starting next week.

Ocean U.S. Exports

U.S. exporters are facing several challenges:

• Tightened capacity from the Southeastern U.S. to the Indian subcontinent, Middle Eastern ports, and North European ports
• Vessel omissions and blank sailings affecting service
• Loss of capacity on service strings relying on feeder services
• Persistent challenges related to earliest return dates (ERDs)

To ensure a smooth loading experience, we recommend booking two weeks in advance for coastal port loadings and 3-4+ weeks in advance for inland rail point loadings.

Indian Subcontinent to North America Update

The Indian Subcontinent to North America route is experiencing significant changes:

• Rising rates due to capacity constraints
• Structural and unexpected blank sailings
• Increased transit times around the Cape of Good Hope
• Growing demand leading to surging freight rates

Large rollover pools have added stress to upcoming sailings, with some carriers temporarily pausing bookings to normalize loadings. This has particularly affected smaller providers, who now face spot market rates exceeding $10,000 per 40-foot container.

However, relief is expected with the introduction of new India America Express (INDAMEX) services by HPL and CMA. These standalone services will support Northwest India and Pakistan, as well as temporarily assist with Colombo loadings to clear backlogs in Sri Lanka.

Port Issues

India's top ports, Nhava Sheva and Mundra, are facing terminal congestion due to heavy rainfall, increased volume, and sliding/bunched sailing schedules. In Bangladesh, political protests have led to a substantial backlog, which is expected to exacerbate ongoing congestion issues in Colombo, Sri Lanka.

Air Freight: Global Overview

The air freight market is showing interesting trends:

• Global average air cargo rates rose by 2% to $2.56 per kilo in the third week of July 2024
• Rates are 14% higher than the same week last year and 47% higher than pre-COVID levels in July 2019
• Asia-Pacific origin spot rates increased by 2% to $3.34 per kilo, marking a 25% increase compared to last year
• Rates from Asia-Pacific to the U.S. increased by 5%, with average spot prices exceeding $6 per kilo

How FreightAmigo Can Help Navigate These Market Conditions

In light of these complex and rapidly changing market conditions, FreightAmigo's Digital Logistics Platform offers several key benefits to help navigate the challenges:

• Real-time Rate Comparison: Our platform allows you to compare door-to-door freight quotes for various modes of transportation, including ocean and air freight. This feature is particularly valuable given the fluctuating rates across different trade lanes.
• Shipment Tracking: With our 24/7 tracking capabilities connected to over 1000+ airlines and shipping lines, you can stay informed about your shipment's status, helping you manage expectations and plan accordingly in case of delays.
• Customs Clearance and Insurance: Our one-stop solution for arranging customs clearance and cargo insurance can help mitigate risks associated with port congestion and potential delays.
• Automated Documentation: In a market where timely documentation is crucial, our automated shipment document feature can help streamline your processes and reduce the risk of delays due to paperwork issues.
• Expert Support: Our 24/7 logistics expert support can provide valuable insights and assistance in navigating complex situations, such as choosing between floating and fixed rates or dealing with equipment shortages.

Conclusion

The global freight market continues to be dynamic and challenging. While some trade lanes are seeing rate reductions, others are experiencing increases due to various factors such as capacity constraints, port congestion, and geopolitical issues. It's crucial for shippers to stay informed and adaptable in this ever-changing landscape.

At FreightAmigo, we're committed to providing you with the tools and support needed to navigate these complex market conditions effectively. Our Digital Logistics Platform is designed to offer transparency, efficiency, and expert guidance throughout your shipping journey.

As we move forward, it's clear that the question "Are freight rates dropping?" doesn't have a simple yes or no answer. The reality is much more nuanced, varying by trade lane, mode of transport, and specific market conditions. By leveraging Digital Logistics Solutions like FreightAmigo, shippers can gain the insights and capabilities needed to make informed decisions and optimize their supply chain strategies in this dynamic environment.