By Alexander Jones, International Banker
Few markets have been as eventful or experienced as much see-sawing price action since 2020 as the ocean freight market. During this time, the global maritime shipping industry has moved from the virtual paralysis of the global pandemic to the soaring peaks of supply-chain crises, and then swiftly onto a state of structural overcapacity and adaptation to a new, geopolitically informed normal. While the previous decade was largely one of rangebound consistency and predictability for shippers and carriers alike, today’s freight market appears to be in a constant state of flux in which inflamed geopolitical tensions, environmental mandates and massive changes in global fleet numbers dictate the cost of moving a container.
Global average spot rates hovered between $1,500 and $2,000 per FEU (forty-foot equivalent unit, a standard measurement for shipping-container capacity, essentially representing one 40-foot container) for many years prior to the onset of the pandemic. But virtually from the moment the new decade began, the coronavirus transformed ocean freight from its long-running steady state as a commoditised, low-margin business by sending prices into the stratosphere.
Moreover, as the pandemic spread globally, the industry faced not only a total shutdown of production but also an unprecedented surge in demand for goods as restrictions were lifted and consumption experienced a major, euphoric rebound across much of the world. This combination proved to be seismic for freight rates; with a lack of empty containers in the right locations globally and port congestion in the United States and Europe reaching catastrophic levels, trans-Pacific spot rates to the US West Coast skyrocketed above $20,000 per FEU, while Asia-North Europe routes reached nearly $15,000. As such, the era resulted in a fundamental shift in the power dynamic from shippers to carriers, who were able to capitalise on the sky-high prices and enjoy record-breaking profits.
By early 2023, however, this bubble had burst.
