This article originally appeared on Zvi’s LinkedIn page.
I spent last week traveling around Asia (6 cities in 6 days!) and one of the recurring themes I heard was shock from carriers about flagging rates.
This goes far past the anecdotal.
This far into peak season, carriers typically hike prices up, driven by the shipping bottleneck caused by China’s Golden Week shutdown, which is just around the corner.
Granted, last year’s rates were impacted by the Hanjin collapse, which caused an upward pressure on rates. But this week, according to the Freightos International Freight Index, prices moved in the wrong direction, dropping to some 80% of last year’s prices at this point.
Take a look at the data:
What’s the deal?
What happened to the GRIs planned for September 15? Or to this year’s Peak Season Surcharges? They’ve all been called off, with GRIs either postponed to October 1 or not implemented in full.
There is a (small) chance that they will recover slightly. Last week’s prices did increase in the final two days of the week, but only marginally. Regardless, the mid-month GRI data tells one story – prices are lower than they were last year and lower than most analysts anticipated.
So why are the rates not ratcheting up? One reason has to be chronic over-supply. That is, short of another event like the Hanjin collapse, not even peak season demand will significantly push rates up.
Here’s one takeaway from this.
Prices, capacity, and shipping reliability all continue to fluctuate rapidly, from bankruptcies, hurricanes, and chronic overcapacity. As a result, supply chain resilience will increasingly require on-demand access to flexible shipping capabilities.
Freightos research has shown the growing importance of spot shipping compared to contracted rates for years. I anticipate that this trend will only continue.