Pressures on Global Shipping Costs

10-May-2010 The Global Financial Crisis brought home the reality that the World’s economies are intricately interlinked. Shipping lines have been hemorrhaging financially, and to survive, last year they dry docked or berthed half their fleets to reduce costs and waited for the world economies to improve. In more recent times, we have seen China commence large growth and we in Australia, have missed most of the GFC fallout backed by our huge commodity exports to China.

What does this mean for rates as they currently stand?

Simple: it is, as usual a case of supply and demand. Volumes have increased in container traffic, yet the shipping lines have not re-launched their mothballed fleets thus causing global space issues and hence higher prices. We do not see this changing in the near future, and in fact, rates ex China for FCL’s are going through General Rate Increases (GRI’s) which are being heavily argued against by major buyers, but are mostly proceeding. Having said that, in recent days we have seen April’s GRI implemented, and days later, lower spot market rates are available. It is Bluefreight’s mission to avail ourselves of the best market rates at any given time.

Given the current economic issues in Europe we hope that the GFC will not re-develop and put further pressure on shipping lines and the Global economy as a whole.

Also at the time of writing this, more volcanic ash is settling over the UK which will further exacerbate the air freight backlogs ex Australia. The current backlogs also highlighted the airlines cashing in on the supply/demand equation and were effectively profiteering by doubling rates.

---