Dramatic retreat in spot rates in line with Shifl’s early predictions

In line with the early indications from SHIFEX, the Freight Rate Index by Shifl, freight rates on the main Trans-Pacific trade lanes have fallen in the 3rd quarter of 2022 by more than 50% from the peak of September 2021, retreating to levels not seen since the beginning of last year. 

A sharp decline in demand linked to the tightening of monetary policy across the world, a shift in consumer spending from goods to services, bloated retail inventories in the US and Europe coupled with a dramatic decline in production in China has been responsible for the sharp reversal in rates in the first six months of the year. 

Rates Under Fire as Fed Battles Inflation

International shipping lines have come under increasing attack for their part in stoking inflation, with the US Congress passing a bipartisan bill in June designed to prevent future freight rate hikes and add extra capacity for exporters. 

Carriers have become a popular scapegoat for US legislators who need to act to rein in inflation, and US president Joe Biden said he "promised to crack down on ocean carriers whose price hikes have hurt American families" when he signed into action the bill. The bill outlines a host of measures to fight ocean freight rate increases, but whether this will actually give the Federal Maritime Commission the teeth it needs to take on the carriers remains to be seen.
The US Federal Reserve increased the prime lending rate by 75 basis points in July 2022 to counter the rise in inflation, which hit 9.1% in July, its highest level for 40 years. 

“Inflation, coupled with softening demand for goods as consumers allocate more money to eating out and holidays, has prompted US lawmakers to step up their efforts to curb runaway prices in the world’s biggest economy through various pieces of legislation such as the Ocean Shipping Reform Act 2022,” said Shabsie Levy, CEO, and Founder of Shifl.

On the back of the softening demand, ocean spot freight rates for a 40’ container (FEU) from China to Los Angeles fell 62% in July 2022 compared to September 2021 and 59% compared to January 2022, reaching $6,600 in July 2022, expected to continue into August 2022.

Rates from China to New York fell 52% in July 2022 compared to September 2021 and 48% compared to January 2022, reaching $9,300 in July 2022, expected to continue to August 2022.