Hello, it’s IINO.
I would like to broadcast IINO san’s Logistics Radio.
I would like talk about the theme, “Container Freight Rates to Normalize in as Little as a Year and a Half.”
Sea Intelligence, a Danish maritime research company, recently released its outlook on future container shipping freight rates.
Daily Logistics Radio by IINO san in 26th Nov. 2021
Trends in Container Freight Rates Over the Past 20 Years
They analyzed the fluctuations of CCFI over the past 20 years and made a presentation on container freight rate trends.
CCFI stands for China Export Container Freight Index, and is an index of freight rates for containers shipped out of China, calculated and published by the Shanghai Shipping Exchange.
Excluding this fare increase, there have been five cycles of rising or falling fares in the past 20 years.
Applying the average weekly decline rate of the five cycles, it would take 26 months to normalize fares, and 18 months at the earliest.
Furthermore, they pointed out that this time the fare hike is more severe than before and it may take even longer to normalize. According to Sea Intelligence, it will take until mid-2023 at the earliest.
I looked at the CCFI chart and for the last 20 years, the most recent fare increase was from 2016 to 2017, before that, the price dropped to a record low from 2015 to 2016.
This decline led to the bankruptcy of South Korean shipping company Hanjin, and NYK posted a loss of about 235 billion USD in 2017.
The price drop was from 2010 to 2012, and the price rose sharply from 2012 to 2013. You can see clearly on the chart that it has been going up and down on a yearly basis.
I found an easy to read chart on an overseas site, so I’ll post the link.
Freight rate reduction could take 30 months
Future Shipping Market Conditions and Awareness of Logistics Costs
The current rate of increase is outrageous. So if you look at the last five price increases and decreases, you can find that the minimum time to recover is 18 months, in general, that means it will take 26 months.
If certain conditions are taken into account, it could last as long as 30 months.
In this case, it means that the shipping industry will continue to boom for the next 1-2 years.
From my point of view, this is a good thing, but I think it is necessary to properly pass on the cost of freight to the unit price of products.
I would like end users to understand that transportation costs are not free.
We are hoping that awareness regarding logistics costs will change during this period.
We will continue to pay attention and update information on how things will turn out in the future, including space.