How inflation, recession, and port congestion affect global freight transportation and you.
Global recession and decreased volumes
The temporary boost from pent-up demand for consumer services appears to be fading, giving way to headwinds from energy supply and price issues. Adding to the issue are the ongoing Russia-Ukraine war, tightening financial conditions, and deteriorating market confidence. Although the few economies including the US are expected to avert a recession, there will only be a tepid growth and a significant decline in consumer spending. The outlook for Q4 in 2022 and beginning of 2023 regarding volume is still a little bit uncertain.
Demand for ocean freight and rates
Cargo volumes dropped slightly during the summer and many major shipping lines decided not to use any more extra loaders. As the global demand slowed, shipping rates fell an average 29% to $4,056/FEU in September. Although, the current rate is 61% lower than its level a year ago, it is still 170% higher than the pre-pandemic norm.
Port congestion and service disruption continues
Disruptions at some of the major global ports due to port strikes and ongoing port congestions forced shipping lines to continue with some blank sailings, port omissions, and service rearrangements to mediate congestion and optimize their network capacity and fluidity. This has led to low ocean schedule reliability.
Ocean Schedule Reliability
While “better late than never” holds true for most, it does not apply for the ocean freight. Although over the past four months, the average ocean schedule reliability had gradually been improving to 45%, it is still far away from the pre-covid levels where it once stood at 80% in 2019. These delays add with snowballing effect to the overall cost of the business that takes in form with extra warehousing time, increased inventory costs, lost business, etc.
As inflation, recession, and port congestion wreaking havoc throughout the freight transportation, the product and shipping costs continue to rise with many vendors finding it hard to be profitable and efficient in serving their end consumers.
If you are opting for a freight service, make sure to discuss with your service provider about these concerns including the lead times and delays and make sure they provide you with a service offering that matches your unique requirement.
The Benefits of Partnering with W.O.L.F. Elite LLC
We at W.O.L.F. Elite LLC are committed to providing our clients with the best-in-class support to enable their success even during these challenging times. Our promise of providing consistently delivering quality and valuable services for our customers remains unfazed by the global challenges.
Get in touch with us today and learn more about how we can leverage our 20+ years of experience and skills to move forward your business while making an impact in the world.