Cost of cargo hits exports, report claims, but global freight prices show signs of decline

Fri 15 Jul 2022
Posted by: Phillip Adnett
Trade News

UK Exports Freight Costs

Record shipping costs are accounting for up to a fifth of the value of British exports and affecting their competitiveness, according to a recent report.

The Centre for Economics and Business Research (CEBR), an economic thinktank, said that long-haul shipping costs had almost tripled when compared with pre-pandemic levels.

CEBR research found that short-haul shipping costs for British businesses to countries such as Germany had gone from about 3.5% of the value of the exports to 7.3% this year.

‘Rising costs’

Longer-haul routes beyond Europe increased from 7.5% to as much as 20.4%, reports the Times.

Business Matters reports Douglas McWilliams, deputy chairman of CEBR, said: “The relatively weak performance of UK exports outside the EU can to a considerable extent be explained by the impact of rising shipping costs and should not be used to deflect the argument that Brexit has affected exports.” 

Rates softening

However, there are reports that freight rates are starting to fall, although they remain well above pre-pandemic levels. 

According to the WSJ, some companies are renegotiating the shipping agreements they struck at the height of the pandemic, or are going back into the market where rates are down.

One large US importer claimed it recently reduced ocean contract rates signed several months ago by between 15% to 20%. 

Seatrade Maritime reports that the Drewry Global Port Throughput Index, a service tracking shipping prices in 235 ports worldwide for shorter-term agreements, stood at 141.1 points in April 2022 – some 1.5% lower than April 2021 – and is a sign that the surge in demand seen after the first set of Covid lockdowns is now on the wane.

Demand down

“This is further evidence that the post-Covid demand boom appears to have run its course,” Drewry said.

Airfreight rates out of China are also softening reports the Loadstar, a specialist shipping website, which points to a number of factors including: tapered fuel prices, the summer lull, a more gradual increase in Chinese production than expected, and lower demand generally.

A separate report by the same website has subsequently claimed that strikes and congestion in European ports were preventing a global decline in ship-freight prices.