The freight market is correcting at a faster pace than expected. Shipping costs have fallen to pre-pandemic levels, while the price drop has been continuing for the 41 week in a row.
Reducing demand by hiking rates is one of the goals of the Fed. This is pushing down supply chain prices, which were a significant factor contributing to inflation. Yet, monetary policy is walking a fine line as a supply-demand resetting can turn into a recession.
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"The main risks for the segment include a potential harsher-than-expected recession and the continuation of pandemic-related lockdowns in China," Fitch Ratings said in a global shipping outlook update.
Fitch sees demand growth for oil tankers in 2023 similar to this year, as tonne-miles increase thanks rising oil exports shipped from Russia to China and India, which were previously supplied to Europe. Dry bulk volumes are likely to be "almost flat" thanks to lower steel production in China.
