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FED will be likely to keep increasing the interest rate in December, and it will definitely drag down the demands of ocean freight and airfreight business.

22 Nov 2022

By Richie Lin.     Photo:Brett Sayles 

Market agrees that FED will increase 3 base points on interest rate in December because there is no sign indicating that the inflation in USA is getting eased. Even though the CPI (Consumer Price Index) in October has dropped to 7.70% from 8.20% in September, it still has a long way to go to make CPI back to the normal 3%. Long term high inflation will jeopardize the economy because people will be forced to buy only daily necessary goods such as food, gasoline, etc. Durable goods such as furniture, home appliances will be less consumed, then those companies which produced durable goods will be forced to lay off people or even file bankruptcy. So higher inflation will create a vicious cycle in economy, and eventually drag down all world into another great depression. Therefore, all governments are using all financial weapons to force down the inflation before it can hurt economy to an unrecoverable level. The most efficient weapon will be increasing interest rate. Increasing interest rate will be like turning off the water pipes, then lower down the water in the pool for nurturing fish. Fish in the pool are the symbols of people’s consumption and companies’ investments. Less water means less fish can survive in the pool. So the consumptions and investments will be decreased, then the prices will have a chance to go down because there will less demands to pursue limited resources and products. When FED keeps increasing the interest rate, it will inevitably cause recessions because several companies will need to reduce the expenditures, lay off the employees to face the decreasing businesses. We already saw on the news report saying that Meta, Google, Amazon, have plans to cut off thousands of employees due to less and less commercial advertisements on their websites. Henceforth, the fear of unemployment will make people restrict their consumptions to keep the money for preparing hard times. In the meantime, the ocean freight and airfreight businesses will go down undoubtedly because there are less and less materials and products to be transported. Shipping lines can and will still use blank sailings to keep up the rate but the decreasing demands will push rate to go downward. This kind of winter is necessary before we can see the spring of burgeoning economy again.

 

FCL market rate reference in week 47:

  • Asia main ports to USAWC USD 2000~2500 per 40GP; 
  • Asia main ports to USAEC USD 4500~5000 per 40GP; 
  • Asia main ports for IPI points of USA is USD 5000~6000 per 40GP. 
  • Asia main ports to Europe base ports and West Mediterranean: USD 4500~5500 per 40GP.

   

Airfreight market rate in Week 47:

Airfreight rate might increase abruptly without further notice. 

The following market rate for your reference. 

  • PVG/SZX/HKG/TPE to LAX USD 4.3/kg, 
  • PVG/SZX/HKG/TPE to ORD USD 4.4/kg, 
  • PVG/SZX/HKG/TPE to JFK USD 5.0/kg.

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