Period : 31st Mar 2022– 30th Apr 2022
Date : 7th May 2022
Researcher : Esther Low
Source : Freightos Baltic Index https://fbx.freightos.com/freight-index/
Global Average Rates of Ocean Freight
As of 30th April 2022, ocean freight is $8,955, a -2% reduction since the start of Jan 2022 ($ 9,167). Ocean freight has started to come down at the start of February 2022 however freight rates remain high in comparison to pre-pandemic rates. The UN estimated that the meteoric rise of freight rates during the pandemic will raise global consumer prices by 1.5% or more and would have adverse effect on economies in vulnerable conditions such as small island countries or landlocked countries.
Ocean Freight Rates for Far East Region
(China/East Asia ↔ North Europe)
Ocean freight rates for routes East Asia/China to North Europe have continued to ease starting Feb 22 ($14,999) up till the end of the reporting period, April 22 (down 26%). Overall, the ocean freight rate for this route is up by 87% from $5,923 in Jan 21 to $11,050 by the end of April 22.
Meanwhile rates for return route from North Europe to China/East Asia is down 33% from $1,158 in Jan 22 to $772 end Apr 22. The average freight rate for this route is $925.
Ocean Freight Rates for Pacific Region
(China/East Asia ↔ North America East Coast)
Freight rate as of 30th Apr 2022 is $17,334, with the highest within this reporting period at $18,432 in March 2022. Based on the earliest reporting period till the last, freight rates have increased by 4% from $16,705 in Jan 22 to $17,334 in April 2022. The average freight rate for this route is $13,847.
For the return route North America East Coast to China/East Asia, the latest freight rate as of 30th April 22 is $891. Based on the graph, the highest rate is $1,036 on 14th Jan 2022 and the lowest rate is $868 which is on 25th Feb 2022. Freight rate for this route is up 6% from 1st Jan 2022 to 30th Apr 2022. The average freight rate for this reporting period is $958.
The pandemic has certainly distorted the market of global container shipping by creating a bottleneck of limited containers which is the main reason behind sky high ocean freight rates. Although COVID-19 has been around for more than two years now ocean freight rates will continue to rise for several reasons.
Firstly, there will be continued global imbalances of production and demand of goods with many countries going in and out of lockdowns. Lockdowns affect more than just demand; it heavily affects manufacturers who produce semi-finished products or raw materials that is usually exported to other countries to be processed into added value products. Such examples are the demand and supply of Printed Circuit Boards (PCB), where China and Taiwan are a huge manufacturer of, that is used in all electronic products. The recovery from COVID-19 will also spark a rapid recovery in demand for such goods as manufacturers and governments scramble to rebuilt inventories further putting strain on the already overburdened supply chain.
Another reason that ocean freight rates will remain high is due to the lack of alternatives to ocean freight, this would mean that any surge in transport costs cannot be avoided as goods will still need to be transported to its destination via ocean freight. The difficulty for buyers and sellers of commodities and raw materials to absorb increase in transports costs would also mean that end product consumers will start seeing increase in prices of goods or reduction in product availability.
Lastly, as countries go in and out of lockdown for the most part of 2020 and 2021 it has created port congestion problems due to closure of ports. Port congestions has caused cancelled sailings and delay or reschedules in port calling. This would mean that vessels would either take a longer time to reach their destinations to offload or unload containers and goods thus creating an imbalance of incoming and outgoing containers within each country.
Towards the end of 2021 and early 2022, most countries have reopened international borders and have learn to live with COVID-19 and return to normal. However the sudden spike in COVID-19 cases in Shanghai leading to a month long strict lockdown has once again created a huge vessel congestion in China which could continue to elevate ocean freight rates especially for routes from China to rest of the world.
To add to this complexity of the recent Shanghai lockdown, the Ukrainian crisis could also elevate freight rates for the trade routes coming from Black Sea to Europe or rest of the world. Russian forces are cutting off shipping routes in and out of the Sea of Azov. Meanwhile as part of the global protest and concern for personnel safety, logistics firms such as Maersk or CGM will suspend services heading to Russia, Belarus or Ukraine whether by ocean, rail or air freight and will continue to put upwards pressure on freight rates for 2022.