Importers bringing in products via the East and Gulf Coast ports breathed a huge sigh of relief after the quick resolution of the International Longshoremen’s Association (ILA) strike. Freight logistics concerns quickly dropped off the internal worry radar for many, who instead shifted their focus to competing priorities.
However, ignoring freight would be a mistake, as rates have steadily declined. Despite the hiccup caused by the ILA strike, buyers can actively secure reductions and take advantage of significant cost-saving opportunities.
Suppliers rarely offer discounts, especially to regular clients, because they see a softening cost market as a chance to improve their margins. So, while metal prices have firmed in recent weeks, buyers can use the drop in freight rates to offset those cost increases.
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Global Rates Dropped Significantly
Drewry’s World Container Index (WCI) decreased by 4% to $3,216 per 40-foot container in recent weeks. Over the past few weeks, Drewry’s World Container Index (WCI) decreased by 4% to $3,216 per 40-foot container. This rate is already lower than it was this summer.
Meanwhile, freight rates from Shanghai to New York fell by 3% ($152) to $5,609 per 40-foot container, and rates from Shanghai to Los Angeles decreased by 2% ($78), bringing the rate down to $4,941. These rates cover multiple routes and cargoes, but those willing to negotiate can find better deals in the spot market.
Simultaneously, rates have dropped by nearly $1,000 per 20-foot container from summer contract rates to the current spot market on Asia-to-Europe routes. That said, savings materialized more slowly on the Asia-to-USA routes because carriers expected massive disruptions and delays from the ILA strike. Now that the strike has been resolved, buyers can also expect rate reductions on U.S. routes.
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The Value of Freight Logistics
With the peak Christmas shipping season over, experts widely expect container shipping rates to fall further in November and December 2024 compared to current levels. Of course, locking in forward contracts might not be the best option if spot rates end up lower than current term contract rates.
New vessels are entering service and increasing capacity, while weak Chinese exports — a significant driver of demand on the Asia-to-Europe and North America routes — continue. Therefore, the only factor supporting prices is shipping lines deliberately removing sailings.
Even importers buying CFR/CIF to U.S. seaports can challenge their suppliers to negotiate freight reductions and pass on those savings as lower delivered prices. At the very least, buyers can use freight logistics savings to counter supplier demands for price increases due to firmer metal prices.
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