The Five-Figure Container May Be Here to Stay

For years, extraordinarily high ocean freight rates have been seen by shippers as temporary because the pattern typically went like this: a crisis hits, capacity tightens, rates surge, and eventually the market settles back down.

However, this time could be different.  Shippers are facing the uncomfortable possibility that the $10,000 container will, at least on some major trade lanes, be something businesses have to regularly factor into their supply-chain planning.

Hey, at least it is predictable!

Unfortunately, shippers may be getting predictability for all the wrong reasons. The concern is no longer just about the next crisis sending freight rates soaring. It is also about why ocean freight rates remain elevated even when consumer demand is not particularly strong. The answer is that carriers have become increasingly effective at matching capacity to market conditions by blanking sailings, consolidating services, and shifting vessels when necessary. This makes it harder for excess capacity to build and create the downward pressure on rates that shippers might normally expect.

Normally, weakening demand would put significant downward pressure on freight rates. The combination of fewer containers and more available vessel space should mean lower prices. However, ocean carriers are responding with sound business practices like adjusting their networks, redeploying vessels, removing capacity from certain trade lanes, blanking sailings, and consolidating services. Ultimately, carriers have a financial responsibility to protect rates and profitability.

This doesn’t mean they are doing anything improper. It does, however, mean that shippers need to recognize the new logistics environment in which they are operating.

The fundamental change is the carriers’ ability to manage capacity much more strategically when demand falls. Today, with weaker demand, carriers are responding by blanking sailings, consolidating services, redeploying vessels, and reducing capacity on weaker trade lanes. This strategy keeps available space more closely aligned with demand and limits the downward pressure on rates.

For shippers, this changes a basic expectation of the ocean freight market – lower demand no longer necessarily translates into significantly lower rates.

That leaves shippers facing a very different planning environment. The question may no longer be whether rates will eventually return to what businesses once considered “normal.” It may be whether that old normal still exists.

For shippers, that means planning for the possibility that today’s rates may represent the new floor.