Over the past few months, container freight rates have been normalizing to pre-pandemic levels. Several spot rate indices have been showing consistent declines for 40 consecutive weeks, but the declines have not translated into losses for transport companies. (The container shipping industry's earnings since the second quarter of 2020 have been estimated at over $400 billion. This is more profit than the industry has generated in more than 50 years of containerized cargo transportation).
While major carriers had earlier predicted a normalization in the markets in the second half of 2022, the declines started quickly. However, according to the Drewry’s World Container Index (WCI), spot price declines appeared to have intensified further last week, especially on the Asia-Northern Europe route.
As of December 1, 2022, the WCI recorded forty consecutive weeks of declines in container shipping freight rates. This index, which tracks spot voyage freight rates, shows the global average at $2,404 per 40-foot unit, down 7 percent from the previous week. The weekly WCI showed a 78 percent drop in the global composite rate between September 16, 2021 and December 1, 2022.
Drewry's Shanghai-Los Angeles index fell 84 percent and the Shanghai-New York index fell 73 percent during the period. Drewry, a UK data provider, saw the average cost to ship a 40-foot container from Shanghai to Los Angeles drop from $11,197 at the end of January to US$2,039 in the first week of December.
Drewry rate assessments indicate a gradual decline in the first half of this year, followed by a faster drop from August. Despite the big drop from last year's record peak, the global index is still 61 percent higher than its 2019 pre-pandemic average.
Commenting on container shipping on the Shanghai-Los Angeles and Shanghai-New York route, the World Maritime Organization explained that this is due to a drop in demand and introduction of many modern and large ships.
Nurmyrat Mommayev,
PhD Candidate at Marmara University's Department of Political Science and International Relations in Istanbul, Turkey
