Freight will continue to decline with global recession

The transportation industry predicts that the decline in freight prices, which has been on a downward trend due to the global recession, will continue in the upcoming period. Barış Dillioğlu, Vice Chairman of the Board of the International Forwarding and Logistics Service Providers Association (UTIKAD), said that a gradual decrease has been observed in freight prices, which peaked in 2021, since the beginning of 2022.

Explaining that as of September 2022, China-West America freight rates were at the level of 4 thousand 300 dollars and this meant a decrease of 72 percent since January 2022, Dillioğlu stated that the freight prices in Asia-Europe decreased by 40 percent and reached the level of 7 thousand 800 dollars. Bilgehan Engin, Vice President of the Association, also pointed out that the Shanghai container freight index fell below 3,000 points for the first time since April 2021, adding, “Therefore, in October, many container operators served from China to the west coast with less capacity. Economic uncertainty, “Started to lower volume expectations for the remainder of 2022,” he said.

After the bottlenecks experienced during the pandemic period, experts expect a huge oversupply of sea transport as early as 2023 and 2024. It is stated that a potential global recession ground caused by high inflation triggered by the Russia-Ukraine war and the energy crisis dragged down freight prices. The slowdown in the increase in demand for consumer products after Kovid-19, high energy costs, and the fact that retailers and manufacturers supply their goods earlier than usual contribute to this decline.

Pointing out that the freight prices reached 20 thousand dollars on the Asia-America and Asia-Europe routes due to the backlog due to reasons such as quarantine and the closure of ports during the epidemic process, UTIKAD Vice President Dillioğlu said: “There were 2 results of this situation. Some giant companies such as Walmart assured their supply chains. “They have established their own logistics networks in order to take them under control and these logistics networks continue to operate. Another result was that shipowners entered the race to acquire new ships. Many transport ships produced and being produced are changing the supply-demand balance and will continue to change.”

Inflation and recession

Expressing that there is a serious economic crisis in the world, Dillioğlu underlined that the biggest markets, North America and Europe, are struggling with serious inflation and economic recession. Dillioğlu used the following statements:

“The war in Russia and the energy crisis are causing the European people to worry, causing a reduction in expenditures. The world economy, which has been accustomed to growth and increasing economic values ​​for many years, meets concepts such as stagnation and shrinkage, and those who have not yet met feel the coming storm. Global economic situation, political crises, wars. Freight prices are not expected to increase in the short-medium term, although the restrictions and restrictions make it difficult to predict the future.

Sharp drop in freight index

Bilgehan Engin, Vice President of the Association, stated that the main reason for the decrease in spot freight prices was the weak demand for cargo and made the following assessment:

Ocean has pulled down spot freight rates and continues to do so. The US distribution system is full of stocks. Demand for consumer goods declines as shopping habits return to pre-pandemic norms, inflation lowers purchasing power, and home sales stall. A similar trend is seen in Europe, North America and parts of Asia.”

New players in the market

Cihan Özkal, Member of the Board of Directors of the Association and Head of the Maritime Working Group, said, “We also see that the high fuel costs prevent the return to pre-Kovid-19 levels. We also evaluate that the new generation seaway container ship investment costs, which will reduce carbon emissions, also cause high levels.” spoke.

The cost of a container sent from Asia to Europe fell by 60%

● The Baltic Dry Index (BDI), known as the indicator of transportation fees in the freight market and one of the leading indicators of the global economy, was at the level of 2,200 points at the beginning of the year, while it remained at the level of 1,242 points as of November 24.

● The value of the Freightos Baltic Global Container Index (40 inch HC container cost), which measures the container freight rates in 12 important seaway lanes of global trade, was 9 thousand 293 dollars at the beginning of this year, but as of November 24, it dropped below 3 thousand dollars.

● According to the index, the cost of containers from China to the west coast region of the USA fell by more than 75 percent compared to January 2022, falling below $2,100. The cost of a container sent from Asia to Europe decreased by more than 60 percent to 4 thousand 300 dollars.

● The World Container Index, prepared by Drewry, continues to decline for 39 consecutive weeks.

While the index fell 7 percent this week, the spot freight pricing of 40 containers was determined as $ 2,404 on November 24.

● This figure was approximately 77% below the peak level of 10 thousand 377 dollars seen in September 2021, and 36 percent below the 5-year average of 3 thousand 768 dollars. Since the beginning of the year, the average pricing has been $6,826.

● As early as 2023 and 2024, a huge oversupply is expected in maritime transport.

● Globally, more than 90 percent of all goods are transported by ship, and therefore container shipping is seen as the lifeblood of world trade.