For small to medium-sized enterprise (SME) traders, shipping costs have been falling, helping US exports in particular more price competitive in overseas markets.
US importers, as well, are feeling the price relief of falling shipping costs.
Ocean Freight Rates
Freightos is reporting that “rates to ship a 40-ft container from Asia to the US West Coast dropped by more than 80% since the end of April 2022, while prices to the East Coast fell by almost two-thirds.”
A large factor in falling logistics costs is the slipping in consumer spending, which had been responsible for increased sales among many US importers over the last two years.
Meanwhile, the Journal of Commerce is reporting that, “Rates are falling fast on the trans-Atlantic as a combination of weak US import demand and surplus capacity continues to drag down prices on the Europe to North America routes.
While market speculation mounts that rates on the trans-Pacific and Asia-Europe trades may have hit bottom, there is still some way to go before headhaul trans-Atlantic rates reach pre-pandemic levels. But the gap is narrowing by the week.”
Cargo Business News reports that “rates on the spot market have been sliding. At the same time, operating costs are near all-time highs. The average price of diesel is around $4 a gallon. Insurance, tires, parts and service, food—virtually every item on the expense sheet has gone up.” In 2021 there was a huge number of new trucking entrants when its pricing was at its highest. While the bulk of these new carriers is receding now, freight brokers and shippers have little trouble finding capacity and negotiating better rates for themselves.
Effect of the US Dollar
At this point, the strength of the dollar versus other currencies is offsetting lower shipping costs. But if the US economy slips into a recession, the dollar will fall, making US exports more competitive.