Multiple Factors Lead to Lower than Expected Shipping Costs
The anticipated rush of cargo following the recent reopening of Shanghai has failed to materialize. The Chinese city had been subjected to a months-long lockdown, the likes of which the west had not seen since the initial days of the Covid-19 pandemic. With business leaders like Elon Musk championing the economic and industrial might of Shanghai, a flurry of activity was expected to return the city to its full capacity. However, current economic hurdles have subdued demand. A positive side effect is a shipping rates decrease.
Shipping rates from China have decreased dramatically in the last few weeks. The dual threat of inflation and high gas prices leaves retailers expecting lower consumer demand and cutting back orders. Industry insiders are not expecting a pick up in demand until Q4 2022. The summer of 2022 is one of the best opportunities in the last several years for those looking to ship freight to and from China.
High Gas Prices Lead to Conservative Spending
The historically high gas prices being faced by the United States and the rest of the world are the result of many different aspects, despite the desire of political commentators on both sides of the aisle to point a finger at singular issues.
While the United States received less than 10% of oil imports from Russia, the percentage was significantly higher in Europe. The economic blockade of Russia for their invasion of Ukraine is leading to an energy squeeze filtering from Europe to the entire world. As of the writing of this article, Saudi Arabia has been capping their oil production (although, a new report optimistically suggests OPEC+ might hike supply soon).
While there is the capability of digging new domestic and international oil wells, gas executives are hesitant to invest in long term projects with the expected rise of electric cars in the next decade and the recent memory of negative trading prices during the height of the pandemic. However, even experts are not prepared for the sky high trajectory of average gas prices. On June 14th, the New York Times reported the expected average price for the month of June 2022 was $4.59; less than a week later the average price was $4.98.
The demand for gas in America has only increased, following workers return to offices and the arrival of the summer driving season. Many Americans are opting for experiential vacations instead of physical goods having been cooped up inside. Consumers looking to tighten their belts have suspended home renovations and canceled subscription services.
Bear Market Helps Shipping Rates Decrease
The other major factor driving down demand is the arrival of a bear market. Defined as a decline of 20% or more across the entire stock market, nearly every sector is suffering (with the exception of energy stocks). The drop is acutely felt by brands like Wal-Mart and Target in the retail sector. With pressure from shareholders to find cost cutting measures and consumer demand down, these retail giants are not placing the same level of orders from Chinese factories.
Ships looking to make up the gap are enticing other clients with lower rates through Q2 and Q3 2022. Any proactive companies will be able to take advantage of this unique situation after a fraught two years of lockdowns, port backlogs, and supply chain disruptions.
How SiShips Gives You The Advantage
Sheltered International combines expertise with state of the art software to bring you the highest quality domestic and international shipping solutions. With the world constantly changing, SiShips puts the shipper in control, offering efficient and cost effective ways to ship your product.
To learn more about managed transportation with SiShips, or to view a demo of our software, contact us today.
