As the year comes to a close, freight rates are experiencing an uptick, and according to Kevin Carpenen, director of ASM Global Logistics Ltd and president of the Association professionnelle des transitaires (APT), this trend is not solely attributed to the traditional year-end rush. A combination of factors, including geopolitical tensions, energy costs, and shipping companies' strategies, continue to drive rates up.
Carpenen explains that the year-end increase in freight rates is typically caused by a mix of seasonal, geopolitical, and economic factors, particularly in international maritime transport. The surge in demand for shipping capacity and the anticipation of supply chain disruptions contribute to higher rates. Shipping companies also adjust their capacities and pricing strategies to maintain their margins, which adds to the upward pressure on rates.
The recent fluctuations in oil prices, with the barrel price dropping below $100 after the US midterm elections, may eventually lead to a decrease in freight rates. However, Carpenen cautions that this decrease will not be immediate, nor will it be directly proportional to the drop in oil prices. The impact of oil price changes on freight rates is complex, and shipping companies do not directly pass on daily fluctuations to their clients.
The use of mechanisms such as the Bunker Adjustment Factor (BAF) in maritime transport means that changes in fuel costs are calculated over several weeks or months, introducing a lag between oil price changes and adjustments to freight rates. Additionally, freight rates are influenced by a range of factors, including vessel and container availability, global demand, trade disruptions, insurance costs, and geopolitical risks.
Carpenen notes that while he is relatively optimistic about the prospects for maritime freight in 2027, he remains cautious about air freight. The ongoing tensions and uncertainties in the global trade landscape make it challenging to predict future trends. Nevertheless, a decrease in fuel costs is a positive factor for logistics costs, which may eventually lead to lower freight rates.
The current upswing in freight rates is not just a seasonal anomaly, but also reflects underlying structural and conjunctural factors, including rising energy costs, geopolitical tensions, and changes in shipping companies' pricing policies. These factors will likely continue to influence freight rates in the coming months, making it essential to monitor developments closely.
Looking ahead to 2027, the key challenge will be determining whether any decrease in international transport costs will be passed on to businesses and consumers. The experience of recent years has shown that a decline in oil prices does not necessarily translate into lower freight rates or prices for consumers. As the global trade landscape continues to evolve, logistics experts like Carpenen will be closely watching market trends to provide insights and guidance.
Key points
- Freight rates are unlikely to drop immediately despite recent fluctuations in oil prices.
- The decrease in oil prices will have a positive impact on logistics costs, but its effect on freight rates will be complex and lagged.
- The prospects for maritime freight in 2027 are relatively optimistic, but air freight remains uncertain.
