Is the freight rate falling ten times in a row? It is expected to pick up in the second quarter! Sky-high freight rates will increase global inflation by 1.5% this year

Container freight rates have fallen for 10 weeks in a row, but the industry is still bullish on this year's market and is expected to pick up again next month.

According to the latest data released by the Shanghai Shipping Exchange on March 25, the latest issue of the Shanghai export container freight index (SCFI) was 4434.07 points, down 106.24 points, or 2.3%, from the previous week, the lowest since the end of August last year. The freight rates of major routes have fallen to varying degrees.

Among them, the freight rate from the far East to Europe fell nine times in a row, with the freight rate per TEU falling by US $204, or 3%, to US $6593, which continued to hit a new low since mid-July last year, with a total decline of 15.8% over the past two months. The rate per TEU from the far East to the Mediterranean fell $114,600, or 1.6 per cent, to $6921.

Freight rates for the far East to the West fell for three consecutive weeks, falling $63 per FEU to $7960 from the previous week, falling below $8000 for the first time since February 11. Freight rates for the eastern route from the far East to the United States also fell another $130 to $10504 per FEU, the lowest since the end of November last year. In addition, the rate per TEU from the far East to Singapore fell by US $37, or 3.2 per cent, to US $1098.

Although freight rates have fallen continuously, the collection and transportation industry is generally optimistic about the market this year, believing that it is not easy for freight rates to be small this year, because the situation of port congestion in North America is still serious, and port operations in Europe have also been affected by war problems. freight revision reflects changes in the market during the off-season. And even in the off-season, freight rates are still at historical relative highs. It is expected that manufacturers' shipping demand will gradually strengthen after entering the second quarter, and the hotter the market performance will be the closer it is to the traditional peak season in the third quarter.

As global oil prices remain high, international container companies will levy fuel surcharges one after another from April, and Asian container companies will also raise comprehensive surcharges to reflect factors such as rising oil prices and port congestion.

Experts pointed out that if you want to reduce the increase in costs caused by rising fuel prices, you can only choose to slow down or charge an emergency fuel surcharge, but slowing down means a decrease in effective transport capacity, and according to the logic of market supply and demand, freight rates may continue to rise. It is expected that with the surcharge, the freight rate may be 50% higher than before.

Sky-high freight rates will increase global inflation by 1.5% this year

The International Monetary Fund (IMF) has studied container freight rates and statistics to calculate the impact of today's high shipping costs on global inflation.

In the latest blog post on the IMF website entitled "how soaring transport costs raise global commodity prices," IMF economists point out that in the 18 months after March 2020, the cost of transporting containers on the world's transoceanic trade routes has increased sevenfold. The analysis predates the conflict between Russia and Ukraine, but hinted with IMF officials that the conflict could exacerbate global inflation and is not isolated.

The IMF has studied data from 143 countries over the past 30 years and found that shipping costs are an important driver of global inflation: when freight rates double, inflation rises by about 0.7%. Importantly, the effect is long-lasting, peaking a year later and lasting for 18 months.

"this means that the increase in transport costs observed in 2021 could lead to an increase in inflation of about 1.5 percentage points in 2022," the IMF said. "

The IMF study comes as regulators and politicians, particularly in the US, are seeking action to control liner pricing. At the same time, many analysts are questioning whether the container market boom has really stabilized, as all major container indices have fallen this month, while economists say the slowdown in consumer demand in the west is largely due to soaring inflation caused by high shipping costs.