<p>Q1 2023</p>
Ocean freight rates on major trade routes have declined steadily and even fallen below pre-pandemic levels. Despite decreased demand, shipping companies have reduced their capacity, but this has not stopped the supply-demand balance from being disrupted. As a result, carriers are fiercely competing for business and using cost as their main tactic.
Gradually, the current state of ocean freight rates is normalizing, and carriers can no longer impose arbitrary charges on shippers.
As a result, the range of ocean freight rates being paid by shippers is significantly contracting.
For example, the average spot rate for ocean freight between the Far East and the Mediterranean was USD 2,600 per FEU at the end of March, which is 80.9% lower than last year. Among the five major trade routes from the Far East, the Mediterranean route saw the largest increase in spot rates from March 2019 to March 2023. In March 2019, the spot rates were USD 1,150 higher than they are currently.
In comparison, smaller rate increases are evident in the routes from the Far East to North Europe and the South American East Coast. However, the rates from the Far East to both US Coasts have decreased since 2019. The rates have gone down by USD 120 per FEU to the West Coast and USD 270 per FEU to the East Coast.
The gap in spot rates between the East and West Coasts has decreased to USD 920 per FEU, making it roughly USD 150 per FEU cheaper than the same time last year.
This shift follows a period where the premium for the East Coast was much higher, due to shippers' desire to avoid congestion at West Coast ports and delays in transporting goods across the US.
The spread between spot and long-term rates on these major trades and many others is also falling.
Shippers are opting to delay signing new long-term contracts, preferring to move larger volumes on the spot market or opting for shorter long-term contracts to avoid being tied to today's rates in a declining market.
However, let it be known that larger shippers or those with more bargaining power can secure long-term rates that are equal to spot rates.