Shipping Prices Declined in March 2022

Shipping Prices Declined in March 2022

May 26, 2022

Shipping prices have skyrocketed during the pandemic, affecting the cost of doing business worldwide, and putting a strain on many people. Even commercial marine insurance, which had previously managed to maintain reasonable levels, could not keep the value low. 

Shipping Costs

The cost of shipping took a downturn in March of 2022. It is unknown how long this will continue‒or how much prices will decline. However, the development is a welcome change of pace.

The Road to Decline

The shipping cost increased significantly over the past couple of years because of the COVID-19 pandemic. The steady string of increases caused significant upheavals in global trade, and many companies struggled to stay afloat.

But in March, the Drewry World Container Index reported a 12% decline in shipping costs, particularly in the containers sector. It is a welcome development for an industry where the onslaught of price hikes has beleaguered.

Why The Decline

There are many reasons why shipping costs have gone down. China played a factor in this. Among the measures implemented by government officials was the closure of many of the country’s ports and manufacturing hubs.

Drewry’s Simon Heaney concurs. As senior manager of container research at the firm, he understands how such developments affect the shipping trade. For Heaney, this new surge has resulted in a supply outage as cargo coming from the country slowed to a trickle.

Heaney feels that the demand for goods from China will do little to alleviate the situation. Because of the closure of the ports and many ships remaining idle, there isn’t enough cargo originating from Chinese ports. 

Silver Linings

One bright spot in all this is the loosening of some of the United States’ essential ports. As shipping from China has slowed down, the congestion in U.S. ports has finally shown signs of easing up over the past few years.

Miami University’s Lisa Ellram shared this observation. A professor of supply chain management at the university, Ellram suggests that the loosening of U.S. ports means that ships docked at Los Angeles and Long Beach have more time to offload their cargo. With more capacity available, the decline in shipping costs is an expected result. 

Another possible reason for the downturn in shipping rates is that the demand for goods might be declining. When major ports were dealing with congestion, companies struggled to move their merchandise. But now that supply chains have freed up; many retailers feel no urgency to place new orders.

It is the assessment of Colorado State University’s Zac Rogers. A professor of supply chain management at the university, Rogers observed that most retailers still have sizable inventories left over from December 2021 to early this year. Consequently, few firms have wanted to place orders that they would typically make at this time.

Rising Fuel Costs

And then there are the rising fuel costs. Rogers suggests that this could be one of the reasons why shipping prices have dipped. For the CSU professor, the resulting increase in truck transport costs may have been too much for some firms to bear.

The demand for trucking will decline. And when that happens, prices have nowhere to go but down.

About Merrimac Marine Insurance

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