Ocean freight rates could decline sharply in early 2023

HIGH POINT – A webinar from the Journal of Commerce last week explored the current state of the supply chain, focusing on ocean freight shipping and consumer demand.

JOC Executive Editor Mark Szakonyi moderated the session and was joined by supply experts Dan Gardner, president of Trade Facilitators Inc., and Steve Hughes, CEO of automotive supply chain firm HCS International.

Key takeaways:

  • Major importers are again seeing an increase in freight costs, and they’ve got to pass those on. Another wave of inflation is coming and the pressure on the consumer will increase.
  • ‘Just-in-time’ buying has become ‘just-in-case’. Importers are increasing their inventories more than they used to. Target and Walmart have implemented significant markdowns to get rid of extra inventory.
  • Inventory numbers are up 15% from last April. When the risk of a loss of sales is greater than potential overhang, which seems to be the case right now, retailers will always order more.
  • Demand for shipping space is still high but perhaps not reflecting falling consumer demand. When will it catch up? Possibly by the beginning of 2023.
  • Gardner predicts eastbound ocean freight rates will decline sharply in early 2023.
  • The backlash against carriers could increase, as they’ve got everyone’s attention with the amount of money they’re making. Legislation curbing them could ramp up.
  • A ‘hard’ pullback from consumers may be seen early 2023.
  • Tariffs being removed won’t necessarily bring down prices.

“The consumer calls the shots with their wallet,” Gardner said on tariffs. “If a consumer is willing to pay X price, and I’m the importer and I all of a sudden get a 25% break, am I automatically going to lower prices? No. I’m going to try to get back what I lost over the past four years. If the market demands I lower my price, then I will. But that’s not a guarantee.”

Watch the full webinar here.

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Robert Dalheim, senior editor of case goods and global sourcing, has been writing about the woodworking industry and business news since 2015. He is a graduate of Northern Illinois University with degrees in journalism and political science. Contact Bobby at rdalheim@furnituretoday.com or by calling (336) 605-3815.

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