Shipping Prices, Volumes Plummeting During Logistics' Traditional Peak Season
When international shipping backlogs and prices went sky-high early in the pandemic, industrial leasing and development did the same. Now, those same shipping measures have decreased sharply and it is real estate's turn to respond.
In what had been the peak holiday import season before the pandemic, global shipping container volumes decreased by 8% in September, according to data from Container Trade Statistics reported by The Wall Street Journal. Shipping container imports from China to the U.S. declined by 23% from August to October, analytics firm Descartes Datamyne found.
The Shanghai Containerized Freight Index, which tracks shipment prices out of China, was down to $1,230 on Nov. 25, down from over $4,200 in June and over $5K at the start of this year, Container News reports. Yet another measure, the Drewry Worldwide Container Index, hit its lowest level since November 2020 this month, the WSJ reports.
It all adds up to a peak season that has failed to appear.
Adjustments to shipping routes that logistics companies made in the past few months have led the ports of Long Beach and Los Angeles to sink to sub-2019 container volumes, but overall, U.S. logistics activity is still higher than what it was before the pandemic. Still, some companies are looking to cut volume and cancel ocean voyages to prevent any more price slippage, the WSJ reports.
From midway through 2020 until earlier this year, extreme backlogs at U.S. ports and the corresponding rise in prices forced retailers and importers to revamp their supply chains, bringing high levels of inventory stateside to guard against delays. Led by Amazon, demand for warehouse space for all that inventory hit previously unheard-of levels, which forced development of new warehouses to follow suit.
As economic conditions for consumers have worsened over the past few months, that inventory remains on shelves. That means the need for domestic warehouse space is still elevated, at the cost of retailers' bottom lines. But plenty of large companies, especially Amazon, are pulling back from supply chain plans that turned out to be overcompensation for pandemic trends.
Attempts to prevent prices from retreating further will be hampered by long-term plans to increase volume already set in motion, but the possibility remains for another overcorrection to create a fresh wave of backlogs, the WSJ reports.
