What Are Freight Rates Expected to Look Like in 2022?
In the last couple of years, freight rates have been relatively volatile, but not for the better. Overall, freight rates across all modes have been continually climbing, making it more difficult for shippers to control their logistics costs and budget accordingly.
However, as we exit a season of disasters and catastrophe, the question lingering in all shippers’ minds is, “How will freight rates behave in 2022?” While remedies have been put in place to help with capacity and congestion issues at ports, officials have been warning shippers to expect many of the implications from the last several years of events to last for quite some time.
2022 Freight Rate Expectations
Experts are currently predicting that 2022 air and ocean rates are expected to rise slightly. However, overall, rates are expected to reflect 2021 levels. Many of these rate increases are expected because of capacity issues—especially in air freight.
In addition to capacity and congestion issues, the pandemic has had a long-lasting effect on supply and production. The pandemic continues to disrupt supply chains through reduced work forces, lockdowns, and increased port wait times as a result of cargo traffic issues. Additionally, raw materials, parts, and consumer goods have gotten more difficult to acquire.
These increased and maintained higher freight rates won’t just affect companies’ margins though. Usually, companies just eat the losses during seasons of high freight rates as they take the temporary loss on behalf of maintaining product selling prices for customers. However, these long-maintained elevated freight rates may end up having a permanent effect on consumer prices. If freight rate changes are expected to be relatively permanent, the best move for companies is to restructure their consumer pricing accordingly.
Planning for the Next Year
Budgeting isn’t easy in a season of volatility, especially when a seemingly temporary trend upwards is beginning to look more permanent.
Currently, many industry experts and officials are recommending that shippers look to secure long-term contracts on rates, as the short-term spot market rates are expected to rise. While it can feel like a risky commitment, if you are shipping higher volumes of cargo, long-term contracts may serve as a risk-mitigation strategy to secure yourself from further market volatility.
If you’re interested in talking with one of our team members to discuss your logistics strategy and how you should rework your contracts this year, please do not hesitate to reach out to us! We’d love to answer any questions you have and help in any way we can!