Ship freight rates have sharply dropped as U.S. and European consumers scale back on purchases, marking a lackluster peak season for ocean freight haulers. Daily market prices for cargo movement from Asia to the U.S. and Europe in September plummeted by up to 90% from early 2022. Major carriers like A.P. Moller-Maersk and CMA CGM are responding by canceling sailings and mothballing vessels to cut operating costs.
This reduction in shipping activity is impacting large retailers, benefiting them with lower rates but contributing to a 7% reduction in container capacity in September compared to the previous year, the WSJ reports. U.S. consumer confidence has hit a four-month low, reflecting concerns about higher prices and a potential economic recession.
The ports of Los Angeles and Long Beach are handling fewer containers, and the average daily freight rate from Shanghai to Los Angeles has seen a significant decline. Large cargo owners are renegotiating long-term contracts as the spot market collapses, with reports indicating a 45% decline in ocean-shipping expenses for major retailers this year.
Shipowners are redirecting vessels to the East Coast in an attempt to stimulate business. This has brought US importers from Europe some of the lowest shipping costs in years. However, the future remains uncertain, with more boxships expected to be delivered, contributing to an increase in overall fleet capacity. Liners are considering strategies such as aggressive demolition and delaying newbuildings, reflecting the industry's efforts to navigate challenges of overcapacity and weakened demand.
