The average ocean freight price has been dropping for over 30 weeks in a row! Despite the fact that its level is still 8% above the five-year average, one can slowly talk about a return to the situation from before the pandemic and record price increases. Will it translate into road transport prices in the near future?
Drewry’s World Container Index fell 10% in the last week of September to $ 4,014.10 for a 40-foot container. This is 61% less than last year. Analysts indicate that in the coming weeks we can expect further declines, up to a level close to the 5-year average. The largest ports are not so crowded anymore, and more container ships ordered by operators are put into use before the outbreak of the pandemic.
Macroeconomic changes are also important for the condition of maritime transport. As port congestion disrupted supply chains, many companies decided to take care of higher inventory levels. So more was ordered than was needed to avoid future shipments not arriving on time. In the short term, this led to an even greater congestion in ports and a rise in prices, but now that warehouses are full, there has been a significant slowdown in the volume of transported goods. You don’t have to wait for weeks for a container to be transported from China to Europe. Lower demand, combined with a marked decline in global economic dynamics, have brought prices in sea transport closer to “normal levels”.
DOES A SIMILAR SCHEME WORK IN THE CASE OF ROAD TRANSPORT?
Unfortunately, a similar scenario cannot be expected in the case of truck transport. Although the world transport network is clearly connected today, sea and road transport are governed by slightly different rules.
The number one difference that will keep the trucks from going cheaper any time soon is a very different nature of the recent price increase. In the case of sea transport, the rising prices resulted from the low availability of cargo spaces – therefore they were not associated with a proportional increase in costs for operators. You can see it when we look at the financial reports of the biggest players. Maersk forecasts that his EBITDA will amount to approximately USD 24 billion this year! In the case of road transport, the rising rates were simply a proportional compensation for the rising diesel prices, which remain high.
In the case of European road transport, it is also difficult to talk about an excess of transport capacity over the needs. Rather, we are dealing here with a structural shortage of drivers (made worse by the war in Ukraine) and modern trucks (which have become very difficult to buy in recent months). Taking this into account, we cannot expect significant price drops in our industry in the near future.
HOW TO DEAL WITH SHIPPING CAPACITY?
Since the prices in road transport are stable and the transport capacity is still lacking, it is worth setting up long-term relationships with reliable transport companies. We are then sure that our loads will be treated as a priority, and possible price reductions will not be the result of compromises regarding quality, timeliness or safety.
Are you wondering what conditions you can count on when establishing permanent cooperation with a transport company? Write to us and see for yourself what we can offer you!
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