For businesses that import and export goods, it’s been a tumultuous couple of years.
From container shortages and port congestion – courtesy of the pandemic – to global conflict and political unrest, the problems have stacked on top of each other. And as a result, the cost of container shipping has reached record heights.
But there’s some good news…
As we head into the new year, it seems the tide may finally be turning. Mercifully, container shipping rates appear to be falling – and a ‘return to normal’ could be on the horizon.
The sinking cost of container shipping
This time last year, the global cost of shipping was at an all-time high.
But over the last few months, it’s come back down to earth with a bang. Following years of uncertainty – and a massive spike in 2022 – rates have fallen dramatically in a short period of time. Some routes are now, in fact, approaching their pre-pandemic levels.
According to the Freightos Baltic Index (FBX) – a widely recognised global benchmark – container shipping costs have fallen by a massive 80% since the start of last year. The average cost of a shipping container is now under $3000, compared to approximately $10,000 in October 2021.
For a company that ships goods on a regular basis, these statistics are undoubtedly a huge relief; providing some long-overdue and much-needed financial respite.
But why exactly is it happening? Are the rates likely to stay low throughout 2023? Or will they go back up?
A journey of demand and supply
There are two main reasons why container shipping rates peaked in the first place:
1. A sudden increase in demand
At the start of the pandemic, there was an incredible surge in demand for goods.
Told to stay at home, consumers in Europe and North America suddenly wanted to buy more ‘things’ – electronic devices, work-from-home furniture, sports equipment etc. And to keep up with the influx in orders, retailers and importers hastily attempted to fill their inventories.
2. Port congestion
Due to this sudden and unprecedented increase in demand – plus port closures in certain counties and worker reductions necessitated by restrictions – goods began to stockpile.
At one point, around 20% of container vessels globally – that’s around 1800 ships – were waiting outside congested ports. And in October 2021, nearly half a million containers were stuck off the coast of the largest port in the US, waiting for spots to open up for them to dock and unload.
Shipping containers were in short supply, therefore considerably driving up their cost.
Fast forward to January 2023 and, thankfully, both of these issues have started to resolve.
Orders for consumer goods have returned to a normal level. Partly because, as lockdown restrictions have eased, people are spending more on services (e.g. hospitality, activities, holidays etc.) than on physical possessions. But also because inflation is taking a toll on people’s disposable income.
At the same time, ports across the world have reopened and had a chance to catch up. The congestion has pretty much cleared. And as a result, efficiency and reliability have both improved.
Will the lower rates remain low?
Now that lockdowns have ended, consumer demand is likely to remain stable over the next couple of years. And as long as ports continue to work through the congestion, supply will be sufficient. Which means the risk of another sudden hike in container shipping rates is low.
Unfortunately, prices won’t fall back to pre-pandemic levels.
A lot has changed in the last few years. The cost of fuel has risen by 40-60%. Ships are more expensive to buy. Canal and port rates have gone up. As such, the base cost for shipping carriers is now much higher – and it’s safe to assume that ocean freight rates will remain around 50% higher than they were in 2019.
But things are definitely going in the right direction. Prices will be much more stable than they have been for a long time. And as a frequent shipper, you’re likely to find you can now move three or more shipping containers, for the same price as just one only a few months ago.
Eager to take advantage of falling container shipping costs?
To stock up on shipping containers and get started, we can help. As a leading UK supplier, we have a comprehensive range of new and used ISO shipping containers (with CSC plates) – all available to buy or hire for an extremely affordable price.
We’ve always strived to be as competitive as possible at Gap Containers. But now more than ever – after the difficulties of the last few years – we appreciate just how important it is to keep up to date with the market and offer our customers the best possible rates.
Work with us and you can expect the highest quality containers, at budget-friendly prices.
For a personalised quote, please don’t hesitate to get in touch. Simply fill out our online enquiry form and we’ll get back to you as soon as possible (usually within the hour!) with an estimated cost. Or, if you have any questions and would prefer to speak to a member of the team directly, give us a call on 0870 240 9405.
We’re happy to help and would love to assist your company in its ‘return to normal’.
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