With demand seemingly on the decline across many industries, shouldn’t rates be dropping faster?

LONDON – The World Container Index tracking indicator from shipping analytics firm Drewry decreased marginally by 0.2% to $7,635 per 40-foot container this week. Last week, the index fell just 0.1%. The week before that? 0.9%.

But with demand seemingly on the decline across many industries, shouldn’t rates be dropping faster? It’s more complicated than that, says Drewry.

“Our evidence is that the policies adopted by the carrier industry in responding to demand shocks are more important than the relative rise or fall in demand,” Drewry wrote in a briefing this week. “Container network inefficiencies and widespread port congestion and inland bottlenecks are also big factors supporting freight rates. The differential between contract rates and spot rates and the interaction between these two markets are other major drivers of rates.

“As soon as the Shanghai lockdown started in mid-March, sailings were canceled by all alliances, and blank sailings will continue in the forthcoming weeks,” it continued. “The result? Despite the sudden slowdown in demand and the huge economic disruptions, the carrier industry reduced capacity in both the Asia-North Europe and Asia-West Coast North America trades in April and May.

“Understanding how carriers manage capacity – faster and more tightly than before 2016 – is an important part of understanding the trend and the lower volatility of freight rates post-pandemic.

“When volumes rebound after the Chinese lockdowns, you could well see an increase in port congestion. Port congestion will act, like blank sailings, as a break on surplus capacity so carriers have two buffers against over-capacity.”

So what can we expect for the rest of the year?

Answering that question is hard, says Drewry, as rates are becoming harder to predict.

“Just as the supply-demand is not the main driver of freight rates in the current market cycle, there will be new factors driving freight rates in the medium term:  decarbonization regulations, ‘carbon pricing’ (expected to start in Europe) and the ongoing consolidation and concentration of the carrier industry.”

According to 87% of experts, the pandemic is still influencing homeowners and how they are using and investing in their homes and outdoor living spaces. For two consecutive summers, many people chose to stay home more than they ever had before, creating the priority for a more engaging outdoor atmosphere. And even as things begin to reopen and return to ‘normal’, many families are choosing to stay home this summer and continue investing in their homes.

Source: https://www.furnituretoday.com/