The retreat of ocean shipping costs and truck freight rates in June offered little solace to consumers as inflation hit a 40-year high.
The Valencia Containerized Freight Index reportedly ended its upward trajectory in June as maritime rates fell by a reported 2.19 percent. Seemingly good news, it was only the second time in 24 months the index dropped. The previous decline occurred in July 2020, when it measured -2.19 percent, month-over-month. Since 2018, the index has swelled by 364.73 percent.
The index is considered consistent with other maritime transportation benchmarks. It typically ebbs and flows in line with geopolitical events such as disruption caused by the Russia-Ukraine war and sanctions leveled by the U.S. and EU on crude oil purchases. Algeria’s recent blockade also impacted maritime transportation lanes. Demand for goods and materials and the price of crude oil routinely drive metrics and the fuel used by container vessels rose by 4.56 percent from May to June. Despite the forces affecting maritime transportation, costs declined slightly.
Unfortunately for American consumers struggling against 9.1 percent inflation in June, importers, and logistics outfits have not necessarily adjusted container fees appropriately.
“Long-term rates to ship goods from China to the U.S. West Coast almost tripled between June 2021 and June 2022 to $7,981 per container, according to Xeneta, a Norway-based transportation data and procurement firm. Short-term rates began to fall in March of this year and in June dropped below long-term rates,” the Wall Street Journal reports.
Container rates from Asia to the West Coast soared above $21,000 in 2021. They have since fallen to as low as $16,000 in June. But industry leaders point out that these costs are astronomical compared to pre-pandemic shipping fees.
“We need to be looking at probably less than $10,000 to get anywhere close to the levels we were before and be competitive,” Carbochem Inc President Gavin Kahn reportedly said.
Although container rates are beginning to slide a tad, spot freight rates went into something of a freefall. Reports indicate spot trucking rates tumbled by upwards of 22 percent through the first six months of 2022. And May marked the first time the spot rate average fell below the contract rate in two years.
Chris Caplice, chief scientist at online freight marketplace DAT Solutions, reportedly said that truck rates are slipping as long-term contracts emerge as the preferred and more stable way of doing business. He also reportedly went on the record indicating shippers — and thus consumers — won’t see the benefit of reduced rates until diesel fuel prices at the pump are reduced to reasonable levels.
“Rates are going down, but they are wiped out by fuel surcharges to carriers,” Caplice reportedly said.
If trucking operations and consumers see the shifting costs and wide-reaching influences on end-user costs perplexing, that’s largely because the supply chain is significantly disjointed. But the constant driving higher inflation while rates dip is the price truckers are paying for diesel to deliver 72 percent of America’s goods and materials.
Sources:
https://ajot.com/news/maritime-transport-costs-down-2-in-june
https://www.ttnews.com/articles/ocean-shipping-rates-begin-decline
Thats because its not a made in America problem, just keep blaming the President