Shipping prices reached historic highs during the peak of the pandemic with prices as high as 16,000 USD per 40ft HQ container China- UK. Prices have been steadily falling since the beginning of the year and last Friday broke through the 2,000 USD barrier.
During the pandemic container shipping rates rose to unsustainable high levels due to increased demand, shortage of capacity and even shortage of equipment as containers got stacked up in Europe and the USA often used as temporary storage instead of being recycled back to Asia as usual. This was compounded by reduced port capacity due to covid outbreaks, closures and short staffing. The shipping lines, having seen many lean years had a bonanza with profits soaring to levels not seen in the industry for decades, if ever. Their shareholders also benefitted from bumper dividends. Some of the profit however has been invested in new, more efficient, even bigger ships.
Since the start of the year demand for shipping has fallen particularly as covid subsided and economies started to struggle, port capacity largely returned to normal, container availability increased and new vessels are starting to come on line. Most recently with the Christmas rush for stock in Europe and North America over and recession starting to bite we have seen an accelerated tumbling of prices to levels not seen since pre covid. Prices for 40ft HQ containers on the Yantian to Felixstowe route are now routinely sub 2,500 USD with some available sub 2,000 USD.
This is a real bonus for importers struggling to cope with inflation on all fronts and hopefully for consumers too. It particularly benefits companies selling low value items or large bulky items where shipping was always a bigger proportion of the total cost.
The question on many importers mind now is will it last. On the one hand shrinking economies and reduced consumption will reduce demand plus new capacity coming on line would both suggest it might last for a while however the current rates are probably unsustainably low and as older less efficient vessels are put out to anchor we may see a correction in the market to a slightly higher level than currently enjoyed. In the meantime if you are an importer – grab a deal while it’s there!