Freight Rate Trends: A Comprehensive Look at Global Shipping Costs in 2024

Introduction

As we navigate through the complex world of global logistics in 2024, one question remains at the forefront of many minds in the industry: are freight rates dropping? This article aims to provide a comprehensive analysis of the current state of freight rates across various shipping modes and routes, drawing insights from the latest market updates.

Ocean Freight: A Mixed Picture

Transpacific East Bound (TPEB) Routes

The Transpacific routes have been experiencing strong volumes, surpassing last year’s figures. However, the freight rate situation is more nuanced:

• Floating rates: Shipping lines have begun reducing rates for both East Coast and West Coast routes to align with supply and demand.
• Fixed rates: Intense discussions around Peak Season Surcharge (PSS) are ongoing, as the gap between FAK (Freight All Kinds) rates and NAC (Named Account Contract) rates doesn’t support mitigations.

Despite these reductions, shipping lines are attempting to stabilize rates for the latter half of August by introducing early General Rate Increase (GRI) announcements. This suggests that while there may be some short-term drops in rates, carriers are actively working to prevent significant declines.

Far East Westbound (FEWB) Routes

For Asia-Europe trade, the situation is slightly different:

• Floating rates remain on the higher end, although the Shanghai Containerized Freight Index (SCFI) has shown a slight decrease over the past two weeks.
• With blank sailings in place, expectations are for the floating market to remain critical, potentially resisting significant rate drops.

Transatlantic Westbound (TAWB) Routes

The picture for Transatlantic routes is mixed:

• North Europe: Some carriers have announced GRIs for September, aiming to stop rate deterioration.
• Mediterranean: Carriers have already increased their rates for August, with no news about further increases in September.

These actions suggest that while there might be some downward pressure on rates, carriers are actively working to maintain or even increase them in certain regions.

Air Freight: Rates on the Rise

Contrary to the mixed trends in ocean freight, air cargo rates are showing a clear upward trajectory:

• Global average air cargo rates rose by 2% in the third week of July 2024 to $2.56 per kilo, despite declining tonnages.
• This rate is 14% higher than the same week last year and 47% higher than pre-COVID levels in July 2019.
• Asia-Pacific origins saw a 2% increase in spot rates to $3.34 per kilo, marking a 25% increase compared to the previous year.
• Rates from Asia-Pacific to the U.S. increased by 5%, with average spot prices exceeding $6 per kilo, a 67% year-over-year rise.

Regional Variations and Factors Influencing Rates

Asia-Pacific Dynamics

The Asia-Pacific region is experiencing unique challenges that are impacting freight rates:

• Port congestion in Asia is improving, but on-time performance for Asia-Europe trade remains suboptimal due to reroutings via the Cape of Good Hope.
• Equipment shortages have improved since May and June, but certain container types may still face shortages at some Port of Loadings (POLs) with less direct calling.

Indian Subcontinent to North America

This route is facing significant upward pressure on rates due to several factors:

• Structural and unexpected blank sailings
• Increased transit time around the Cape of Good Hope
• Rising demand
• Large rollover pools adding stress to upcoming sailings

As a result, rates are expected to continue climbing into August, with some spot market rates exceeding $10,000 per 40-foot container.

European Challenges

Europe is grappling with its own set of issues affecting freight rates:

• Port congestion in Netherlands/Belgium
• On-and-off strikes in Germany and France impacting terminal operations and last-mile deliveries
• Congestion in the Mediterranean region, with average wait times of 4-7 days outside main ports in Italy and Spain

Strategies for Navigating the Current Freight Rate Landscape

Given the complex and often contradictory trends in freight rates across different modes and routes, businesses need to adopt strategic approaches to manage their shipping costs effectively:

1. Plan ahead: Book ocean freight 2-4 weeks in advance, depending on whether you’re loading at a coastal port or an inland rail point.
2. Consider premium options: For urgent cargo with target delivery dates, select premium options as early as possible to secure earlier estimated time of departure (ETD) and higher equipment priority.
3. Stay informed: Keep a close eye on market updates and carrier announcements to anticipate potential rate changes.
4. Diversify shipping options: Consider a mix of ocean and air freight to balance cost and speed, especially for time-sensitive shipments.
5. Leverage technology: Utilize digital logistics platforms to compare rates, track shipments, and optimize your supply chain operations.

Conclusion

So, are freight rates dropping? The answer is not a simple yes or no. While some ocean routes are seeing downward pressure on rates, others are experiencing increases or attempts by carriers to stabilize prices. Meanwhile, air freight rates are generally on an upward trajectory. The global freight market remains highly dynamic, influenced by a complex interplay of factors including demand, capacity constraints, geopolitical events, and regional challenges.

For businesses navigating this complex landscape, staying informed and adopting a flexible, strategic approach to logistics management is crucial. By leveraging the power of digital logistics platforms and working closely with experienced logistics partners, companies can optimize their shipping strategies and better manage costs in this ever-changing environment.

As we move further into 2024, it’s clear that the freight rate landscape will continue to evolve. Businesses that remain agile and well-informed will be best positioned to navigate these changes successfully and maintain a competitive edge in the global marketplace.