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Freight Rates Lose Their Steam



Only a couple of months ago on a hot summer day, it was surprising to see nearly a dozen of emails from various trucking companies servicing at major hubs across the United States who were offering extra capacity to cover containerized loads. Only a week after, we received one of the very first announcements from a container liner that promised for a rate drop effective immediately.

By late October, Freightos Global Container Freight Index, the average freight per forty foot equivalent unit (FEU) dropped from $9000 early this year to low $3000. It fascinates us how the freight rates from Mainland China to Los Angeles, which were hovering around $20000 per container about nine months ago compared to the level in present that is less than $2000.


In Chicago area, one of the major hubs in the United States, it was nearly impossible to find a truck to move a single container without waiting minimum of a month only a few months ago. Now, the availability is immediate. Fedex has recently started laying off drivers across the United States at a very unusual time before the holiday season, a time freight volumes normally reach to peak levels. Online retail giant Amazon is expected to layoff about ten thousand employees in the coming months. The ports of Los Angeles and Long Beach, for the first time in decades, reported 25% drop in freight volume for September right on the eve of holiday season.


What happened to the heated freight market all of a sudden? It is obvious that global economical slowdown is hitting the freight markets. As the consumer confidence goes down, at a time of high inflation, people tend to spend less and more carefully, major retailers tend to control inventories more carefully. The cost of money had also gone up significantly in line with extremely high interest rates which will likely result with reduced company spending.


An interesting 2023 looks to be on the horizon...




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