Market Morsel: Containers no longer stacked.

Market Morsel

I wrote about the falling container rates (see here) in July. My view was that the slowing economy would see a reduction in demand for consumer goods and, therefore, a decrease in demand for containers.

It is important to keep an eye on freight costs, as it impacts our competitiveness for exports. Just as importantly, lower freight costs help our imports. We have a huge range of products imported for agricultural use  – from containers to machinery parts. A lower freight cost should assist with lower production costs (eventually).

The first chart shows the freight rates to the major routes from China. We can see that they have come under considerable pressure and edging back to pre-covid levels.

The important point to note is that if we examine averages, the freight to China never experienced the same increase in price as ex-China. This was due to the demand for goods from China during Covid as consumer spending increased.

One point to be aware of is, that the fall in container rates is on the main routes, and sub-branches like Australia will take a while for the rates to drop as far.

It’s a good sign for cheaper freight, but it might be a bad sign for the global economy.