Though still elevated for many markets – and disrupted for most – the cost of international sea freight continues to retreat rapidly. All the main indices were pointing down in September and toward mid-October, with significant decreases being reported for the major sea freight routes.
Bunker fuel prices continue to trend down, with nearly all indices lower in September and early October. With fuel the largest operating cost for most shipping activities, lower fuel costs are part of the reduced cost of shipping. That said, Russia’s war on Ukraine continues to place pressure on all energy costs and there is little prospect of a dramatic reduction in most fuel prices, including bunker fuel.
Some ship charter rates have also fallen, with reduced demand for shipping as the world tightens its collective belts. However, some countries leasing vessels on annual cycles, have reported they received the standard annual discount, rather than some more aggressive discount.
Container Freight Costs Moderating
The China Consolidated Freight Index (CCFI) shows the cost of shipping finished goods from China around the world is now moderating.
Over 2021, the weighted average cost of containerised freight doubled. Since the start of 2022 the weighted average cost has declined 41%. The Australia/New Zealand route was down 22.6% lower over this period, however, underscoring the likelihood small and distant routes will face sustained price pressures.
China Containerised Freight Index: 3 Jan ’20 – 21 Oct ‘22
Source: Shanghai Shipping Exchange
Similar data is presented by Drewry’s World Container Index (WCI). The WCI shows 81% of the cost growth over the pandemic has been eroded since February, with the index 67% lower over the year-ended 27th October 2022.
Baltic Dry Index (BDI)
In mid-October, the Baltic Dry Index (BDI), the main indices of raw materials shipping costs, was 17.4% lower than recorded at the end of 2021. The trend line for bulk trade costs is still pointed up, but as the recent history chart below shows, current dry-bulk shipping costs are significantly below the trend.
Baltic Dry Index (Bulk Dry Shipping): 2 Jan ’20 – 21 Oct ‘22
Source: Bloomberg
