Bolloré Logistics reports that inflation and surging oil prices have sent ocean freight volumes in a downward spiral, which in turn causes spot rates to drop. It is the first time in months that the market is pivoting away from the stronger than usual freight demand and elevated shipping rates, seen since the beginning of the COVID-19 pandemic.

The waning demand has been contributing to a steady decline in spot freight rates since the Chinese New Year, which took place in February. Container Trades Statistics (CTS) data indicate that April volumes were down 4.9% from the previous month, and down 4.2% compared to the same month last year. Nevertheless, carriers still achieved record earnings before interest and taxes (EBIT) in the first quarter of 2022.

Despite weakening demand, port congestion remains a problem, particularly in the US. To recover schedules that have been disrupted by delayed vessels, carriers have been cancelling or skipping port, region, or possibly an entire leg of the route. Blanking sailing is particularly common in the routes between Northern Europe and North America, as well as routed between the Mediterranean and North America.

Capacity-wise, global fleet capacity is forecast to grow by 8% in 2023, according to Alphaliner, while demand is expected to increase by 4.5% only. New regulations by the International Maritime Organization, to further reduce ocean shipping’s carbon emissions, the IMO 2023 will take effect in six months, and are expected to affect 55% of fleets. Indeed, carriers will have to make adjustments to meet the new requirements.

Irwin Lefebvre, Bolloré Logistics’ Ocean Procurement Director stated: “there are no significant changes in the ocean freight market as rates remain very high. Even if rates were to fall with the slowing demand, in the coming weeks, carriers would try to hike freight rates in order to secure their long-term contracts”.

Sign up to the Project Cargo Journal Newsletter