Shipping costs have fallen dramatically in the past year, with some routes approaching pre-pandemic levels. Freightos’ data reveals that the Freightos Baltic Index (FBX) – a benchmark for global freight rates – has dropped by 80% since late 2021, signalling the end of a two-year boom period for shippers.
The cost of shipping containers had reached record highs, and congestion at American ports was making headlines just over a year ago. The IMF found that rising shipping costs were an important driver of global inflation. This is because most trade occurs over the world’s oceans, so high shipping costs can have a significant impact on the world economy. When freight rates double, inflation rises by 0.7 of a percentage point.
However, some countries are affected more than others by higher shipping costs, especially those that import more than they produce and that are more integrated into the global supply chain. While the falling shipping costs are good news for most people, shipping companies are scrambling to keep prices from bottoming out completely.
They are cancelling voyages and sending obsolete ships to scrap, while container spot freight rates rose in early January for the first time in 43 weeks, signalling that the rollercoaster ride shipping rates have been on since the start of the pandemic may be coming to an end.
