Freight transport in the United States becomes cheaper amid weakening demand

In the United States, freight costs are falling amid weakening demand and uncertainty about the state of the country’s economy, writes The Wall Street Journal and freight broker training school.

This is leading some companies to renegotiate high-priced shipping deals at the height of demand for shipping during the height of the COVID-19 pandemic, or to enter the spot market to take advantage of lower rates.

The decline in transportation costs after two years of rapid growth was good news for manufacturers and retailers. This implies an easing of upward pressure on inflation. But shippers say they are still paying several times what they were before the pandemic disrupted supply chains around the world.

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In early 2022, shippers were willing to pay record high prices to secure space on container ships ahead of the fall and winter peak shipping seasons, after major delivery delays through much of 2021. However, now the situation has changed and the main reason for the fall in freight rates is considered to be a decrease in demand.

A spokesman for a major US importer told the WSJ that he recently cut rates by 15-20% on shipping contracts signed months ago. “The situation is in favor of importers,” he said, adding that he expects a further drop this year.

According to Norway’s Xeneta, long-term rates for shipping goods from China to the US West Coast nearly tripled between June 2021 and June 2022 to $7,981 per container. Short-term rates began to fall in March of this year, and fell below long-term rates in June.

However, the spot rate on July 6 was more than four times higher than on the same date in 2019, Freightos, an online freight marketplace, said in a statement.

Imports of consumer goods fell by about $1.5 billion in value in May, according to the US Department of Commerce, as Americans began buying fewer expensive items such as furniture and televisions. At the same time, U.S. container imports remain strong by volume and congestion in East Coast ports is increasing.

U.S. spot trucking rates fell 22% in the first half of the year, falling below long-term contracts in May for the first time in two years, according to online trucking marketplace DAT Solutions LLC.

Chris Kaplis of DAT Solutions believes that shipping costs will go down, but shippers will not gain anything without lowering the price of automotive fuel.

Carrier fuel surcharges are currently approximately 80 cents per mile. “The rates are going down, but they are offset by fuel surcharges,” Kaplis said.

Freight transport in the United States becomes cheaper amid weakening demand