01 Aug

4 Questions About 2021 Freight Rates

Are freight rates still rising? 

Freight rates increased by 80% by the end of 2020, due to a drastic increase in demand. During the pandemic, people stopped going to theaters and restaurants. Instead, online shopping thrived, increasing the need for freights and shipping which led to container shortages. Companies then started to pay premium spot rates, increasing freight rates furthermore. Therefore, 2021 started off with both high volume and freight rates. According to the Freightos Baltic Daily Index, freight rates from China to the U.S. west coast are up 173% from the same time last year. 

Is cargo volume decreasing? 

Cargo volume still remains high. The January shipment file count for 2021 was only a little less than 10% smaller than the numbers during peak-shipping season in August and September. While cargo volume is decreasing, it is by no means a substantial amount. January usually gets a slight increase in volume at the end of the month when importers try to get their cargo before Chinese New Year begins. Then, importers get a bit of a reprieve as manufacturers in China close down for a few weeks. However, the shutdown of Chinese factories did not happen this year. As a result, the volume of cargo has only been decreasing incrementally. 

What are some factors that are increasing the intermodal freight quotes cost? 

In general, the transportation environment is still rather unpredictable in the global pandemic. Even with vaccines being distributed, most regions of the world are still being plagued by COVID-19 cases. And a large portion of international freight will be allocated to vaccine movements and more urgent cargo, resulting in the continuation of unknown rates in 2021. Many freight operators are all experiencing similar warehousing and distribution issues. Some include labor shortages, and social distancing requirements slowing down the supply chain process and logistic activities. Retailers are still struggling to sustain high inventory levels, so shippers may be looking to get a leg up on peak season, which starts in July. There may be no immediate relief from high costs, long delays, and equipment shortage.   

When will truck and rail freight rates go down? 

In this current situation, many freight companies are wondering when freight rates will be expected to go down. However, there may be many potential delays before the high freight shipping costs start decreasing. 

Freight markets have remained quite strong throughout the pandemic, and it has created a supply and demand structure that favors carriers and forces shippers to pay higher rates. Trucking volumes and rates have been climbing since summer of 2020. With the high demand from consumers, importers are constantly rushing to stock up in their inventory, which causes the capacity in trucking to tighten and the rates to rise. With truck and rail freight consistently being in high demand, the rates will not be going down anytime soon. Market tightness may ease up if more tractors are brought to the road, or if more truck drivers return to work. But even if the cargo is ready to be transported, quarantine rules for returning drivers can still cause significant delays.