Revealing the Trend of Freight Rates from Late 2020 to Early 2021
December, 23 2020
Maritime Transport: A Key Component of International Trade
Maritime transport has long been a fundamental part of international trade and will continue to be crucial in the future. It remains one of the most cost-effective transportation methods, allowing for the shipment of goods in much larger quantities compared to other forms of transportation. Therefore, monitoring freight rates is essential for importers and exporters to understand cost trends and make accurate future projections.
Factors Affecting Freight Rates
The changes in freight rates are influenced by key factors such as shipping routes and distances, fuel costs, and fluctuations in foreign exchange rates. These three factors have a direct impact on freight rate pricing.
Additionally, external factors also play a significant role. For example, the COVID-19 pandemic caused a slowdown in global shipping, reducing cargo volumes and increasing transportation costs. This led to higher per-unit product costs. More recently, the U.S. presidential election resulted in Joe Biden’s presidency, which may bring policy changes that either ease or alter trade regulations. Furthermore, import and export regulations in various countries continue to be closely monitored as they impact global trade.
According to Drewry, an independent research and consulting firm specializing in the maritime industry, the spot rate for the Trans-Pacific trade route surged significantly due to the impact of COVID-19, exceeding previous record-high freight rates by 40%.
Impact of Supply Chain Disruptions
This unprecedented event goes beyond normal supply and demand dynamics. Moreover, exports to the United States have been expanding rapidly, leading to a shortage of shipping containers.
Lessons from COVID-19 have led shipping companies to collaborate by sharing cargo space on vessels. This strategy helps prevent freight rates from rising too sharply, allowing customers to affordably access shipping services while also reducing operational cost burdens for logistics providers. However, the sharp decline in imports from China, a major global trading hub, has led to container shortages. Exporters are now forced to import empty containers for shipping, incurring additional costs without productive benefits.
The Unavoidable Surge in Freight Rates
As a result, freight rates are expected to remain elevated through the end of this year and into early next year. However, if the COVID-19 outbreak remains under control after the first quarter of 2021, global trade and transportation activities should return to normal, leading to a decline in freight rates.
Source :
https://www.kaohoon.com/content/391144