Dive Brief:

• Ocean shipping rates and loaded import container volumes both dropped by the end of 2018, but the pricing environment leading into 2019 remains more expensive than usual. 
• The biggest shift came in the form of spot rates. Over the course of December, shipping a container from China / East Asia cost an average $1,967 per TEU when headed to the U.S. West Coast and $3,179 per TEU for the U.S. East Coast, according to Freightos Baltic Index data. 
• The figures respectively represent a 22.9% and 12.9% drop from the average rates in November, but a 92.5% and 77.4% rise on a year-over-year basis.

Dive Insight:

Downturns are expected at the end of the year, as freight providers normalize their supply and demand fundamentals after peak season and before the start of the new year.

Although spot rates dropped in December 2018 compared to November, the figures remain far above what has been previously considered normal. If December in any way reflects one of the lowest price points for freight in the shipping cycle, as it has in previous years, the high rates this year bode poorly for shippers' budgets.

Higher December rates this year may be attributed to various causes, from an outsized demand for imports, carriers adjusting their freight networks and variations in crude oil costs. It is not the first year spot rates in December are higher than yearly medians: In 2016, spot rates for shipping to the East Coast also failed to drop significantly. That year, ocean carriers were recovering from a supply shock after Hanjin Shipping, then the eighth largest carrier, declared bankruptcy.

The higher rates may signal carriers were expecting a similar shock as they prepared for 2019.

Just last week, Freightos predicted shippers would see rates rise by up to 10% in January as shipping lines implement surcharges to help cover the cost of adapting to new fuel regulations. As of January 6, rates to ship a container from China / East Asia had risen to $2,003 per TEU for the West Coast of North America, and $3,137 for the East Coast. And with the Chinese New Year a month away, rates are unlikely to subside further soon.

The last time the shipping industry suffered a big shock, in late 2016, shippers paid the price in spot rates. Prices peaked first in November, before reaching new heights in February, and eventually subsiding. The 2018 - 2019 shipping cycle appears to be following a similar trend.