High ocean freight rates were expected to return to pre-pandemic normality, and with a significant drop in rates heading into 2022, it was predicted that rates could continue to decline throughout the year. As shown in the Ocean Freight Rate Tracker de Ti: Q2 2022, the first quarter of the year has at least delayed these hopes for now. Rates have risen since the fall in Q2021 2022 and continue to rise in the first month of QXNUMX XNUMX. Rates backhaul (return path) also remain somewhat elevated from their pre-pandemic levels, reported Ti.

Volume, despite already being at high levels, has continued to increase overall in Q1-22, especially on the US West Coast (USWC). In Oakland the volume grew 13,2% compared to the previous quarter, and in Los Angeles and Long Beach 7,3% and 7,5% respectively. This continues to cause port congestion, a major factor contributing to keeping rates high in 1Q-22. Statista data shows that, on average, 11,1% of global shipping capacity was lost to congestion in 2021, up from 2,3% in 2019. This continues to rise in Q1-22, with the congestion causing the loss of 12,7% of global capacity on average in January.

There are signs that the conditions are being created for rates to start falling. While the COVID-19 lockdowns in China may themselves cause disruption, this may begin to provide limited but much-needed relief from the congested ports of the USWC and also the now increasingly congested USEC.

Participants in the shipping industry do not believe that the second quarter of 2022 will mark the beginning of the end for high ocean freight rates. The Maritime Transport Confidence Index of Ti, which tracks shipper and carrier expectations of rate developments, stood at the end of April just below the 50-point mark, indicating an expectation of moderate rate increases in the coming months.

However, the share of respondents who believe rates are going to “significantly increase” fell by a third between January and April, suggesting that many see upward pressures easing.

While it is true that air freight rates react more quickly to external factors than sea freight, the problems causing continued upward pressure on rates are not going to improve any time soon. The war in Ukraine seems to have no end in sight, the Chinese government remains steadfast in its Covid zero policy, and the disruption to shipping continues.

Taking into account the combination of factors driving shipping, it appears that the direction of ocean rates in the second quarter of 2022 will be little changed from the previous quarter. Although more volatile, a similar picture is presented for air freight in the second quarter. However, growth prospects for major economies look increasingly pessimistic, with the possibility of a global recession in the second half of 2022 becoming more likely. If so, the contraction in demand could be what is needed for freight rates to finally return to pre-pandemic levels.