Editor's PickForexShipping costs from Asia continue to fall as demand weakens

September 22, 2022

Importers bringing goods into the UK from Asia should see the cost of shipping continue to fall steeply before stabilising next spring, industry experts predict.

As congestion in global supply chains has eased and demand fallen, the cost of moving containers from Asia has fallen by 30 per cent in the last two months and halved from the peak in the autumn of 2021.

The cost of a 40ft container shipped from China to Europe is now around $7,000, according to the ocean freight data supplier Xeneta, down from highs of more than $14,000 during the run-up to last year’s Black Friday sales and Christmas stock-up period.

Lars Jensen, chief executive of the consultancy Vespucci Maritime in Copenhagen, said prices would continue to fall. “All the indications are that they will not come back up,” he said.

He said he expected rates to “overshoot” to the low side in the coming months before rising again and stabilising around March or April next year. “They will drop too far and then rebound and come back up,” he said.

Richard Fattal, co-founder of Zencargo, a digital freight forwarder, said falling demand reflected weaker retail sales in western markets as well as destocking by companies that no longer felt they needed to hold so much in warehouses.

He said congestion in ports such as Antwerp and Hamburg, in addition to the strike at Felixstowe and the ongoing industrial action at Liverpool docks, was causing challenges.

Ship owners could also react to falling prices by managing their capacity, he added, while any further port disruption in China from Covid outbreaks could also affect the market.

Fattal predicted that rates will still stabilise, but at a higher rate than before the pandemic. “The consensus is that cost bases [of shipping companies] are higher than they were before,” he said.

He added that the lower freight costs would feed through to budget planning for 2023, as wholesalers and retailers work out how much their goods are costing them. “They are able to reassess budgets for next year and decide whether they pass on savings to customers,” he said.

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