State of Freight Webinar discusses shift in the freight market
Both tender rejection rates (white line) and spot rates (red line) have risen sharply the past two months, which typically leads to a rise in contract rates. (Chart: SONAR)
On the December State of Freight webinar on Tuesday, FreightWaves CEO Craig Fuller and SONAR Director of Freight Market Intelligence Zach Strickland discussed the outlook for the 2025 freight market. In the prior month’s webinar, they declared the freight recession over. From here, the question becomes how dramatically the market will improve. Specifically, how much will freight rates rise? Fuller expects rates to rise at least 4% but would increase as much as 6% as changing market dynamics shift risks to shippers. He expects the change in the market to be felt more acutely in the second half of next year than the first since it takes time for the impact of new policies under the Trump administration to be felt.
For details, see Noi Mahoney’s summary or view a replay of the one-hour webinar.
Ocean spot rates decline despite solid import demand
Booking volume for imports into the Port of LA (white line) has held up in December better than what is typical seasonally. Meanwhile ocean spot rates from China to the U.S. West Coast (yellow line) have declined in recent months. (Chart: SONAR)
The Freightos ocean spot rate to move a 40-foot container from China to the U.S. West Coast declined from over $5,000 per unit throughout November to a current rate of $3,607 (white line above). Some of that decline may be explained by seasonality as demand generally declines in the fourth quarter when the peak ocean shipping period passes. But demand metrics seem to be holding up well, which the National Retail Federation attributes to frontloading by importers. For instance, the SONAR Inbound Ocean TEU Volume Index for the Port of LA (yellow line) has fully rebounded from its Golden Week low to its September level. That’s a contrast to the first and second quarter, when the demand and rate metrics moved together (Chinese New Year being the main exception). Therefore, while demand remains strong, likely due to a pull-forward to avoid tariffs, added ocean capacity will likely pressure rates in the coming quarters – rates that, for now, are still at elevated levels relative to history. Maersk estimates that ocean capacity is rising 2%-3% per quarter, and Flexport estimates that capacity will increase by 8% and 6% in 2025 and 2026, respectively.
The Stockout Show featuring Flexport
(Image: FWTV)
On Monday’s The Stockout show, Grace Sharkey and I interviewed Alex Berry, Flexport’s VP of omnichannel. Omnichannel is one of the hottest topics in retail and consumer goods currently. The concept is that a seller can leverage common pools of inventory to support in-store purchases, online orders for delivery, online orders for pickup and sometimes even subscription-box services. That creates challenges for consumer goods companies, such as complying with retailer-specific rules (e.g., the requirements to qualify as a product eligible for Amazon Prime) while keeping inventory at reasonable levels. In addition, online influencers lead to unpredictable and dramatic spikes or droughts in sales. Managing that volatility effectively requires as much visibility into supply chains as possible. Flexport supports that by leveraging its air and ocean freight capabilities.
See Monday’s show here and check out the full The Stockout playlist here.
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