Latest Shipping & Freight forwarding market updates [May 2023]

Lower Shipping & Freight Costs and Reduced Congestion 

Imagine a world where businesses and consumers no longer have to worry about exorbitant logistics costs during the pandemic. Well, that world is here! The freight forwarding market has undergone a remarkable transformation, resulting in lower shipping and freight costs, as well as reduced congestion. This shift has brought relief to businesses and consumers who were concerned about high logistics costs during the pandemic. The changes in the market have had a positive impact on the efficiency of the supply chain.  Get ready to breathe a sigh of relief. 

One of the notable improvements in the freight market is the decrease in ocean freight prices from China to the US West Coast since spring 2022. These prices have now returned to pre-pandemic levels, alleviating financial burdens on importers. In particular, congestion levels, which were a major concern at the LA/Long Beach port, have significantly eased and returned to normalcy by late November. This has resulted in smoother operations and a more efficient supply chain.  

Shipping costs for a 40-ft container from Asia to the US West Coast have experienced a drastic plummet of over 80% since April 2022. Similarly, prices on the East Coast have dropped by almost two-thirds. The sharp decline in logistics costs can be attributed, in part, to reduced consumer spending, which had previously fueled heightened sales for importers. This cost reduction brings much-needed respite to businesses and enables them to allocate resources more efficiently. 

These positive market developments indicate a significant shift in the freight market, fostering enhanced efficiency and profitability for businesses. The industry's ability to adapt to the changing landscape, especially in the post-pandemic era, has played a pivotal role in improving operational effectiveness. By streamlining processes and addressing congestion concerns, companies are now able to transport goods more smoothly and cost-effectively, thereby increasing their overall profitability. 

Looking ahead, the freight forwarding market is poised for further improvements. The adaptation to post-pandemic conditions has set the stage for a more resilient and efficient supply chain. With reduced congestion and lower shipping costs, businesses can expect better control over their logistics expenses and improved customer satisfaction. Moreover, ongoing efforts to invest in infrastructure, acquire new containers, and order additional container ships will contribute to further streamlining the freight market, ensuring its continued growth and development. 

2023 Ocean Freight Market Updates: Stabilized Rates, Declining Volumes

The freight forwarding market in 2023 experienced a welcome stabilization after a period of volatility and rapid cost increases in shipping. Factors such as enhanced supply chain management, improved operational efficiencies, and a deeper understanding of market demand have contributed to this balanced state.

When looking at the average shipping costs per Container Load on major trade routes, we find that they remained relatively stable in 2023, with only a slight 1.2% increase compared to the previous year. This rate stability has allowed businesses to better predict and plan their costs, enabling them to make informed decisions and allocate resources more effectively.

However, despite the rate stabilization, the ocean freight market has faced a decline in volumes. This decline can be attributed to various global economic factors, including trade tensions, geopolitical uncertainties, and shifts in consumer demand. These factors have had a tangible impact on both import and export activities, requiring businesses to adapt their strategies accordingly.

Recent data from INSEE indicates that the volume of goods transported by ocean freight experienced a significant 5.7% decline in 2023 compared to the previous year. This decline underscores the need for businesses to reassess their approaches and adjust to the changing market dynamics. It has become essential for companies to explore new markets, diversify their services, and find innovative solutions to mitigate the effects of declining volumes.

The combination of stabilized rates and declining volumes presents both challenges and opportunities for freight forwarders : 

• Stable rates improve forwarders' services, strengthen partnerships with shipping lines, and add value to customers.

• As volumes decrease, forwarders must proactively seek growth through market expansion, service diversification, and exploring alternative transportation modes for long-term success amidst challenges

To tackle challenges and seize opportunities, forwarders adopt digitalization and advanced techs like blockchain, AI logistics platforms, and real-time tracking. These advancements optimize operations, cut costs, and provide reliable, efficient service.

Freight Cost Fluctuations: from 2020 to 2023 

The freight forwarding market experienced significant fluctuations in shipping costs from 2020 to 2023 due to the COVID-19 pandemic and its impact on global supply chains. These fluctuations were influenced by various factors such as supply chain disruptions, changes in consumer demand, and attempts to manage capacity.

At the onset of the pandemic, the freight market faced challenges in managing the sudden surge in consumer demand. As a result, prices soared during the summer of 2020 as carriers struggled to meet the increased shipping requirements. However, as the supply chain crisis persisted, freight rates gradually decreased, albeit with some lanes still experiencing higher prices compared to pre-pandemic levels.

In December 2020, rates for freight ex-China to North America and Europe remained relatively stable compared to November but were approximately 40% lower than the previous year. This subdued demand continued into subsequent months, creating a challenging environment for carriers. However, industry players are hopeful that if key economies can avoid serious recessions, demand will eventually recover to more typical levels and seasonal patterns will return by 2023 as inventories normalize.

The container load segment of the freight market also experienced significant fluctuations during this period. Container shipping is a crucial component of global trade, and disruptions caused by the pandemic impacted this sector as well. These disruptions led to varying container load prices and availability, further contributing to the volatility in shipping costs.

To tackle challenges and capitalize on opportunities, freight forwarders are increasingly adopting digitalization and advanced technologies. They utilize solutions like blockchain, AI-based logistics platforms, and real-time tracking systems to streamline processes, enhance visibility and improve operational efficiency. These advancements enable forwarders to optimize operations, reduce costs, and provide a more reliable and efficient service to customers. 

2023 Air Freight Market Update: Delays, Cost Increases, Forecast

The freight forwarding market continues to witness significant challenges in the air freight sector during 2023. Despite hopes for a demand recovery, the industry still grapples with subdued demand, resulting in stable but low rates compared to the previous year. Shipping costs remain a concern, and the market forecast remains uncertain. 

The low demand observed in the previous months has persisted into December, as reflected in the air freight rates index from China to North America and Europe. Although rates have remained stable compared to November, they are approximately 40% lower than those recorded a year ago. Carriers are optimistic that, as key economies avoid severe recessions, demand will gradually normalize, and seasonality will return in 2023 as inventories stabilize.

However, the freight forwarding market faces significant challenges of delays and cost increases. Global events and disruptions have resulted in capacity constraints, labor shortages, and operational issues, leading to delays in air cargo transportation. Additionally, the combination of reduced capacity and high demand has caused prices to surge, prompting carriers to adjust rates to offset the rising costs.

According to statistics, the global air freight market's size in 2020 and 2021 is projected to reach over 87 million metric tons. While specific data for 2023 is unavailable, the forecast suggests a potential growth trajectory in the coming years. Factors such as economic recovery, trade patterns, and industry dynamics will influence the market's performance.

Amazon Shipping Costs: FBA Freight Overview 

Amazon.com, being one of the largest e-commerce platforms in the world, relies heavily on efficient and cost-effective shipping methods to ensure timely delivery of products to its customers. Over the years, the freight forwarding market has played a crucial role in facilitating Amazon's shipping operations.

According to available statistics, Amazon's annual shipping costs have steadily increased from 2011 to 2022. In the most recent fiscal year, Amazon's shipping expenses amounted to $83.5 billion, compared to $76.7 billion the previous year. These figures highlight the significant investment Amazon makes in its shipping operations to meet customer demands efficiently.

Tracking door-to-door prices for Amazon FBA shipping can be challenging. However, with access to thousands of weekly pricing points from freight forwarders, a weekly freight price index has been developed. This index encompasses both Less than Container Load (LCL) and Full Container Load (FCL) shipments, as well as air freight, from major export cities in Southeast Asia to Amazon's popular distribution centers in the United States.

The availability of comprehensive freight market data allows Amazon to optimize its shipping strategies by analyzing pricing trends, identifying cost-saving opportunities, and making informed decisions regarding the most efficient shipping routes and modes of transportation. This data-driven approach enables Amazon to streamline its supply chain and ultimately provide customers with faster, more reliable shipping services

Shipping prices: will the decrease persist in 2023?

The global freight market is an intricate web of supply chains, logistics, and transportation networks that connect businesses and consumers worldwide. One crucial aspect of this market is the shipping prices, which heavily impact importers, exporters, and freight forwarders alike. 

How to steer the freight market? 

The freight market is subject to various factors, including global economic conditions, fuel prices, trade policies, and supply and demand dynamics. Importers and exporters face the challenge of balancing cost-effectiveness and timely delivery of goods. To navigate this complex landscape successfully, industry players must stay informed about market trends and employ strategic decision-making. Regular monitoring of freight market updates, including shipping costs and container load fluctuations, enables businesses to adapt their shipping strategies proactively. By leveraging data-driven insights and partnering with reliable logistics providers, importers can optimize their operations and potentially benefit from cost savings.

How SME importers can plan successful freight forwarding operations with Siam Shipping? 

Small and medium-sized enterprise (SME) importers often encounter unique challenges when it comes to freight forwarding operations. Limited resources, lack of expertise, and high shipping costs can hinder their ability to compete effectively in the global marketplace. However, with the assistance of a reliable logistics partner like Siam Shipping, SME importers can overcome these obstacles and achieve success. Siam Shipping specializes in providing end-to-end freight forwarding services tailored to the specific needs of SMEs. From document preparation and customs clearance to warehousing and last-mile delivery, Siam Shipping offers comprehensive solutions that simplify the entire shipping process. By leveraging Siam Shipping's expertise and industry connections, SME importers can optimize 

Conclusion 

In conclusion, the freight forwarding market has experienced significant changes and development recently. Lower shipping and freight costs, along with reduced congestion, have brought relief to businesses and improved supply chain efficiency. The decrease in ocean freight prices and the easing of congestion at major ports have positively impacted importers. Looking ahead, the freight forwarding market is expected to see further improvements, with reduced congestion, lower shipping costs, and ongoing investments in infrastructure. Challenges persist in the air freight sector, including delays and cost increases, but gradual recovery is anticipated. Adopting digitalization and advanced technologies is crucial for freight forwarders to optimize operations. Reliable logistics partners like Siam Shipping can help SME importers overcome challenges and achieve success in the global marketplace. Contact us!