Wavering demand is one cause of declining shipping costs, according to The Wall Street Journal (subscription).
Cheaper contracts: Unusually expensive shipping contracts like the ones that were signed at the beginning of 2022, when carrier capacity was tight and demand was sky-high, are losing their appeal. Several companies are attempting to renegotiate shipping deals or enter the spot market for cheaper rates.
Why: “Freight specialists say different forces are driving down rates across ocean shipping and trucking, but softening demand is a common factor. The lower rates are appearing first in spot markets and are helping to bring down longer-term contract rates.”
By the numbers: An official at a large U.S. importer said it reduced its ocean contract rates from earlier in 2022 by 15% to 20%. The official further said he expects more reductions later this year. Trucking spot rates fell by 22% during the first six months of 2022.
- The National Retail Federation released a report last week predicting overall import volumes will decline in comparison to strong levels a year ago.
In context: Despite the recent decrease in costs, shippers note that transportation rates remain well above pre-pandemic levels. The current spot rate to ship a container from the West Coast to China is four times higher than it was in July 2019, while supply chain congestion exacerbated by the pandemic is still keeping shipping costs high on several busy routes.