Freight Rates Have Fallen. But Have They Fallen Enough?
After months of continuous advances, freight rates show early signs of easing. But...
After months of rising, freight rates have fallen but not by much.
Freight costs have been on the rise through the year, accompanied with volatility in availability of containers to ship goods in and out of the country. Disruptions along shipping routes, a shortage of containers and strong demand all played a role.
While rates peaked in October, and have eased since then, the decline in prices remains limited.
The average price of containers at Indian ports in December was 10-15% below the peak recorded in September and October 2021, according to data shared by CareEdge. Although container rates have eased from November onwards, they are still three to four times of what they were before the pandemic, said Arunava Paul, associate director at CareEdge.
Even as container shortages are being managed better at ports, freight rates remain very high and continue to show volatility, Paul said.
Arun Garodia, vice chairman of the Engineering Export Promotion Council, also said that freight rates have eased by 10-20% from the peak but they're still quite high. They stabilised in time for shipments of festive supplies to the U.S. and the EU for stores, he said. Container availability has improved too, he said.
Global indices continue to show mixed trends, with freight rates from China showing no signs of easing.
The Baltic Dry Index, a globally tracked shipping cost benchmark, was at 3,216 on Dec. 13, 2021, according to Bloomberg. This was a decline of 43% from its peak in October. Still, the index was over three times its pre-pandemic level in January 2020.
On the other hand, the Shanghai Containerised Freight Index, which represents rates to and from Chinese ports, rose to a record of 4,811 as on Dec. 10, 2021, according to data from Bloomberg. The pace of increase has eased, with the index rising by just about 3.5% since the start of October.
Global container shipping supply-demand remains very tight due to ongoing port congestion and vessel delays, said a research note by Bloomberg Intelligence dated Dec. 14. The Omicron variant could potentially disrupt Chinese harbour operations after a district in the port city of Ningbo is placed on lockdown, the note said.
A return to more normal rates may take time. Container rates may require at least one to one-and-a-half years to normalise to pre-pandemic levels, Paul said.