Will freight rates return to epidemic highs?

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The Red Sea crisis continues to escalate, impacting the global logistics industry. Maritime consulting agencies predict that freight rates may return to the high levels seen during the epidemic. Although freight rates are still continuing to rise, Xie Zhijian, former chairman of Yang Ming Shipping, is cautious about this.

He pointed out that during the epidemic, the two presidents of the United States, Trump and Biden, jointly issued five trillion U.S. dollars in subsidies. This move greatly stimulated the consumption of the American people, and they made purchases at home, resulting in a shortage of sports equipment, Bicycles, electronic products and other goods are in short supply. In order to cope with market demand, importers have increased their import efforts. At the same time, due to the shortage of dock workers due to the epidemic, severe congestion has occurred at the port. These factors have jointly promoted the soaring of freight rates.

However, Xie Zhijian believes that the situation has changed now. As subsidies have been reduced, people's consumption patterns have begun to change, and the demand for goods is no longer as strong as it was during the epidemic. Although the current Red Sea crisis has caused ships to divert, with the continuous delivery of new ships, shipping capacity has gradually been replenished, which makes it unlikely that freight rates will continue to surge sharply, let alone return to the high price of 1.5 per large box during the epidemic. Ten thousand to ,000 level. Industry executives, including Yang Ming Shipping, generally agree with this view and believe that freight rates are unlikely to return to the peak of the epidemic.

Industry insiders pointed out that the demand for medical supplies, household supplies and sports equipment during the epidemic was a rigid demand, which was significantly different from the current market situation. In particular, as the impact of the epidemic gradually weakens, people's consumption patterns have changed, turning more to catering, tourism and other service industries. Therefore, the demand for goods has decreased compared with during the epidemic. In addition, some industry insiders have expressed concerns about the purchasing power of end consumers, believing that this may limit the continued rise in freight prices. They estimate that there will be an upper limit to this wave of price increases, and it is unlikely to return to the high prices during the epidemic.

According to the latest "Global Online Shopper Trends Report 2024" released by DHL ECOMMERCE, the report is based on an in-depth survey of 12,000 consumers in 24 important markets around the world and found that today's online shoppers are particularly sensitive to shopping costs. Especially when choosing a delivery method, they tend to look for affordable, flexible and convenient options. High transportation costs have become a key factor that prevents shoppers from completing purchases. According to survey data, up to 41% of shoppers have given up purchasing because of high transportation costs.

Lars Jensen, CEO of Vespucci Maritime, proposed two possible development directions for the container shipping market. He pointed out that some ships are currently waiting for up to a week in major ports, and there is also massive congestion in the western Mediterranean. The market appears to be repeating the mistakes made during the epidemic. In the worst-case scenario, port congestion could result in a 14% reduction in capacity. However, at the same time, there is a huge demand boom in the market, which is further pushing supply chains that are already lacking capacity to increase production.

Lars Jensen believes that the current situation may only be a very early sign of the peak season. If this speculation is true, then after entering early July, the demand boom may weaken, and the market will get a certain degree of respite, or at least freight rates will reach an upper limit.

But on the other hand, if the current demand boom is not just an early peak, but indicates stronger long-term demand, then freight levels are likely to continue to rise, and may even try to reach or exceed the records set during the epidemic..

However, when asked about the specific likelihood of this happening, Lars Jensen said he could not give a firm percentage because there are many uncertainties and variables involved in this prediction.