Shipping company UPS recently announced that it will raise its rates by an average of 5.9% starting in late December. Earlier this year, FedEx said it will raise rates by the same amount. In both cases, that’s a smaller increase than the companies decided on last year. And it’s a sign that demand for shipping services has been easing.
Jason Miller, a professor of supply chain management at Michigan State University, said there’s less stuff to move around. By truck, boat or plane.
“The tonnage of air freight from Asia to the United States is down 17% from where it was last year,” Miller said. “It’s actually at the lowest level since 2017.”
As a result, Miller said, carriers like UPS and FedEx know there is a limit to how much they can raise prices.
“At what point do the customers make the decision that they’re going to go elsewhere, either the United States Postal Service or one of the regional carriers?” Miller said.
That said, companies are still trying to cover their higher costs for things like worker pay and energy, said Adie Tomer at the Brookings Institution.
“We have seen some upward trends in oil pricing,” Tomer said. “Trying to break the future of oil is hard, but it’s a necessary part of how companies like this prepare for the future.”
But Tomer said shipping prices will stay under pressure if consumer demand keeps slowing down.