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How will freight rates increase in 2024?

North American shippers and importers should expect freight rates to rise in 2024. A range of factors, from energy prices to geopolitical problems, will create disruptions to the freight industry throughout the year. Shippers across Canada and the U.S. should prepare to reduce the impact of projected freight price spikes.

Understanding the factors that influence freight rates can help you plan a strategy that mitigates rising freight forwarding costs in 2024. 

Freight rate increase

General freight rate increase 2024 - U.S. and Canada

UPS and FedEx, the two largest global carriers, announced that their 2024 tariff rates will rise by 5.9%, including ground, air, and international shipping. This freight rate increase is one percentage point less than the 6.9% tariff rate price rise imposed by these carriers in 2023.

These general rate increases in 2024 represent the cost of non-contract shipping. The vast majority of goods are shipped under contract, so tariff rates are typically used as a reference point for negotiating freight forwarding spot rates and contracts. A 5.9% boost to tariff rates indicates a trend, not an automatic increase in your shipping costs.

The United States Postal Service (USPS) also announced rising rates, while Canada Post informed Canadians of planned price increases in 2024. USPS Ground Advantage shipping will rise by 5.4%, their Priority Mail will increase by 5.7%, and Priority Mail Express delivery will match the 5.9% increase of UPS and FedEx. Meanwhile, Canada Post proposed a hike up to 99 cents for the least expensive stamp option, a rise of approximately 7.6%.

Freight tariff rate hikes and rising postal rates show what businesses in Canada and the U.S. can expect this year. Disruptions in ocean freight will likely add to the challenges of importing overseas goods into North America.

Importers face volatile ocean freight rates

Container prices skyrocketed when Iran-backed Houthi rebels attacked ocean carriers in the Red Sea towards the end of 2023. At the start of 2024, the Lunar New Year added more upward pressure on costs. As a result, the Freightos Baltic Index showed that container prices rose to $6,152 per forty-foot equivalent unit (FEU) for Asia-U.S. East Coast shipments. Asia-U.S. West Coast shipments climbed to $4,099 per FEU.

Since the Red Sea attacks started in October, China-U.S. East Coast rates have nearly tripled while transit times have grown to an average of 37 days.

The U.S. and the United Kingdom have responded, but ocean freighters remain targeted by Houthi attacks across the south Red Sea. As such, some of the largest shipping and energy companies continue to suspend transportation across one of the most crucial maritime shipping routes on the globe.

If the instability in the Rea Sea doesn’t halt, the impact to shipping and importing costs will remain significant.

What causes increased freight rates?

Supply and demand is one of the main causes of freight rate spikes. Greater demand and reduced availability increase the cost of moving goods across waterways, roads, rail, and air.

If global economic growth and e-commerce activity booms, a higher demand for freight forwarding will increase the cost of the services. Higher labour costs, energy prices, and insurance premiums also result in rising shipping prices for businesses.

Political problems, such as the crisis in the Red Sea and Russia’s invasion of Ukraine, can force the movement of vital goods to a standstill. War and armed conflict that blocks transportation typically cause freight costs to skyrocket.

How to mitigate rising freight rates

Importers have no control over many variables that increase transportation costs, including economic conditions, geopolitical events, and energy prices. This doesn’t mean that businesses don’t have options to combat growing freight rates, such as:

  • Building relationships and partnerships with trusted customs brokers and carriers
  • Negotiating with freight forwarding providers to create solutions that give you greater flexibility and reduced costs
  • Using technology such as transportation management systems, freight spending software, and procurement solutions
  • Adopting updated transportation strategies and new solutions to optimize processes
  • Keeping close track of relevant news, changes in regulations, and market trends that impact the flow of goods to your business

Freight rate increases impact the bottom line of your business. Let an experienced freight forwarding professional help you adjust to a constantly changing economic landscape. Connect with us to learn more.

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