Containers and bulk: return to pre-Covid freight tariff
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The horizon has cleared in the sea freight industry. Falling fuel prices and lower demand have pushed transport prices down from their peaks in late 2021.
The decrease in the Baltic Dry Index shows how much the context on the world’s oceans has developed. It has fallen from 5,500 points in fall 2021 to below 750 today. The BDI is an indicator for freight rates calculated on around twenty sea routes for the bulk transport of materials such as coal, iron ore and grain.
reflecting falling demand
Above all, its decline reflects falling demand and, as a result, a stagnating economy. For example, coal purchases have been reduced significantly since inventories in consuming countries have returned to comfortable levels. The same applies to iron ore. The construction sector has not picked up speed again, particularly in China. Grain transport was directly affected by the war in Ukraine, which led to a drastic decline in maritime traffic.
With less demand, the level of port congestion has returned to pre-Covid levels. It is the return to some fluidity, with generally much shorter waiting times, that is also helping to lower sea freight rates. Another factor contributing, albeit marginally, to the relaxation of prices is the arrival of new bulk carriers on the water, increasing transport capacities.
Container prices are also on a downward trend. The Freightos Baltic Index, calculated on a dozen global routes, is more than telling: While it was worth an average of $11,000 for a 40ft box at the end of 2021, it is approaching $2,200 these days.
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A year 2023 that is still suspended in China
This drop in ocean freight costs, fueled by ongoing recession fears, has helped pull down the prices of many commodities. It also stimulates competition. In Europe, some manufacturers fear that with the arrival of cheap Chinese raw materials such as paper, they will no longer be competitive.
The rebound in Chinese activity will be the factor driving freight rates in 2023, recalls Marc Pauchet, an analyst at Maersk Broker, who expects freight rates to rise in the second half of the year.
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