Trends in transport and logistics prices in 2024

What is the freight rate trend in 2024?

It's been a bit of a rollercoaster ride for container transport prices recently. Pandemic-related issues such as port congestion, labour shortages and a limited supply of containers have pushed transport prices to unprecedented levels. Back in 2022, our full analysis of freight price developments highlighted these challenges. Now, in 2024, the industry is facing a new phase: while some stability has been achieved, new potential disruptions, both economic and geopolitical, could still impact container transport costs.

How have the freight prices been developing?

While freight rates had already increased significantly in the pandemic year 2020, they rose even more rapidly in the following year. In September 2021, the price of a 40-foot container on the Asia-Europe route reached a record high of over USD 20,000 – exceeding the average freight prices before the pandemic many times over. Find out more about the backgrounds by clicking on the link.

After a renewed rise in freight rates with the start of Russia's war against Ukraine in early 2022, the price situation calmed down again in the second half of 2022 and early 2023. This price easing was primarily due to two main reasons:

• The demand for goods normalised again
• The supply chains improved again

Freight rates were back to normal by the end of 2023, but they remained subject to stronger fluctuations depending on the trade routes and seasonal factors.

What's going to happen in 2024, given new potential disruptions?

Freight rates remain stable at low levels, but are still well above pre-2020 levels. The latest Drewry WCI Composite Index of $5,551 per 40ft container is 47% below the previous pandemic peak of $10,377 in September 2021, but 291% above the 2019 (pre-pandemic) average rate of $1,420. With the global economies still slowing down, particularly in major economies like China, Europe and the USA, importers are being more careful which results in less demand for container transport.

Another issue is the ongoing tensions in different parts of the world, like the ongoing war of Russia against Ukraine, as well as the conflict between Israel and Palestine, which is having a knock-on effect in many other areas. The following factors in particular have the potential to influence the price situation for transport.

1. Disruption to trade routes and logistics

Israel and the Palestinian territories are right on the doorstep of the Suez Canal, a major global trade route connecting Europe and Asia. With its 193 km lengths it saves cargo ships a distance of 6,500 km. In 2023, around 26,500 ships passed through the canal, carrying 1.3 billion tonnes of cargo.

So far, the canal hasn't been directly affected by the conflict between Israel and Palestine. But if the conflict escalates into regional tensions, it could threaten security along the route, causing delays and diversions of ships. And ultimately, such disruptions could add up in terms of transport costs.  

Fearing a blockade of the Suez Canal, a growing number of container shipping companies are already avoiding the route in favour of the longer route around the Cape of Good Hope. This increases the voyage time from 19 to 31 days, which in turn drives up costs. And according to the major shipping companies, these costs have risen to tens of millions of dollars.

The region's ports are also a factor influencing changes in freight rates. Israel's ports, such as Haifa, are important trade hubs in the eastern Mediterranean. Any military conflict could affect the operation of these ports, leading to delays and higher logistics costs.

2. Oil prices and fuel costs

Since the price of oil and energy has a significant impact on the price of transport, the Middle East with its major oil market is of course also a decisive factor in the current developments of freight rates. So, even if conflicts in the region are not directly affecting oil-producing countries, they can create uncertainty that leads to fluctuations in oil prices. And of course this means that fuel prices for ships and other means of transport increase, which results in higher container shipping prices that affect global trade and supply chains. These price changes can affect the whole logistics sector, from shipping companies to the people who use their services, because the costs are passed down the supply chain.

3. Geopolitical tensions and sanctions

Geopolitical conflicts can result in sanctions being imposed on particular countries or companies, which can have a significant impact on global trade. Sanctions can then of course affect the operations of companies and suppliers, creating uncertainty and reducing trade volumes. With less trade going on, there'll be less demand for container transport services as companies face restrictions and market instability. On top of that, sanctions can cause supply chain problems, with shipments being redirected or trade being stopped completely. This can put even more pressure on global logistics networks and might lead to price swings in container transport.

4. Impact of demand

Conflicts in key regions can lead to a slowdown in economic activity, which also has a direct impact on trade. As demand for imports and exports falls in the affected areas, freight rates may drop on certain routes. But global uncertainties can also create imbalances that lead to price increases on other routes because of changes in the supply and demand for goods. This makes container shipping prices pretty unpredictable. Regional conflicts can reduce demand in some areas while increasing costs in others where trade routes or supply chains are disrupted.

Strategies for scaffolding companies to manage rising costs effectively

Freight rates are still subject to fluctuations and the reasons for this range from the risk of disrupted trade routes, rising fuel costs to current geopolitical tensions. While these factors do not necessarily have the same impact on current price trends as, for example, the Covid-19 pandemic, they still have the potential to affect the global supply chain, trade and ultimately changes in transport prices.

By following these tips, you can help to minimise the impact of possible rising prices for your business: