Freight companies are canceling some crossings due to low demand for imported products. The cost of shipping a container from Shanghai to Los Angeles has dropped 73% in the past year, the data shows. Consumer spending is changing and retailers are instead focusing on running out of inventory. Something is loading.
Freighters are canceling departures on key routes, including from Asia to the United States, as inflation suppresses demand for imported goods, according to a new Wall Street Journal report.
In the first two weeks of October, about 60 cargo crossings from Asia to the United States were canceled, compared to an average of four to eight per week most days, The Journal reported.
Shipping company MSC announced last week that it was temporarily suspending one of its services and merging it with another route “due to significantly reduced demand for shipments to the West Coast of the United States during the last few weeks”. The Journal reported that the suspended route has the capacity to transport nearly 12,000 containers per week.
This is in stark contrast to the maritime chaos that began last summer and continued until early 2022, when ports were congested as high demand for goods coincided with labor shortages in the ports and in the shipping industry.
Transport costs also drop. Globally, the average cost of shipping a container is around $4,000, down from a peak of just over $11,000 in September last year, according to the Freightos Baltic Index. .
Meanwhile, the costs of shipping a 40ft container from Shanghai, the world’s largest port, to Los Angeles and New York have fallen 73% and 54% respectively over the year. elapsed, according to Drewry’s data.
Rates have steadily declined over the course of 2022, although they remain elevated relative to pre-pandemic levels.
“The global economy has thrown some curveballs this year, and our outlook for future demand is uncertain and tepid,” Jonathan Roach, container analyst at shipping broker Braemar, told the Journal. “Overcapacity will likely become an issue from mid-2023 to 2024 and potentially beyond.”
The Journal reported that retailers stockpiling for the holiday season means that late summer and early fall are typically the busiest times for major carriers. But the current economic downturn has caused huge shifts in spending, reducing demand for many goods. Inflation in the United States is 8.3%, according to the Consumer Price Index from the Bureau of Labor Statistics.
Russia’s invasion of Ukraine and reduced factory production also affected the amount of goods available for export.
Meanwhile, some U.S. retailers are struggling to sell excess inventory. Non-auto retail inventories stood at just under $550 billion in July, down from $451.5 billion in the same month in 2021, according to government data.
Macy’s, Target and Walmart are among the companies that said they were struggling to move items they ordered in huge quantities during the supply chain chaos and were in high demand during the pandemic.
Walmart employees told Insider that the back rooms of their stores were filled with pallets and outdoor storage trailers after being “slammed with nonstop freight.”