The notion that the high price regime was baked into moving goods and exports around the world and at home was smashed in August.
After more than two years of sky-high freight prices that had kicked off the currentinflation cycle, transportation rates are falling.
The average cost of moving standard shipping containers is now
40% below the peak in September 2021, according to the latest reports from Drewry, a global transport consultancy.
The reduction in transportation costs is good news for manufacturers and retailers after two years of rapidly rising expenses.
It also suggests the contribution of the freight sector to inflation is at least levelling off.
But importers and exporters note they are still paying several times more than they did before the Covid-19 pandemic snarled supply chains world-wide.
The cost of fuel, albeit high, has started to slide on the back of more output from the major oil producers, offsetting the Russian oil reductions.
Port congestion has eased in most of the major ports internationally, assisted by the increased availability of shipping containers from global shipping lines Maersk, CMA-CGM, and Hapag-Lloyd.
The world's largest container shipping companies were working hard through last year to make up for the lack of containers on the market and have expanded their capacity by deploying new vessels, as well as placing orders for hundreds of thousands of new containers to be added to the global fleet.
We have now reached an oversupply. An early indicator is the collapse of prices for secondhand containers on the Irish market.
The situation is a sharp turnaround for traders who at the start of this year were willing to pay record-high contract rates to guarantee space on container ships ahead of this year’s autumn and winter peak shipping seasons, following severe delays and inventory shortages through much of 2021.
However, strikes at the British ports of Felixstowe, its largest container port, that started Sunday morning, and a potential strike at Liverpool, are making life difficult for exporters and importers now planning their autumn shipping schedule.
The Felixstowe workers are demanding higher pay amid rising inflation.
Similar action was announced at the port of Liverpool, with the dates yet to be decided, with around 500 port workers to go on strike over pay and working conditions.
This news comes at a critical point for Irish traders who have been adjusting their supply lines to minimise the impact of Brexit, as well as trying to restore lost profits following the Covid lockdowns.
However, there is no doubting that softening of consumer demand across international markets is key factor in the downward trend in freight rates, which seems set to continue.
The IMF, in its latest economic outlook, indicated that the global output of goods and services fell in the second quarter, owing to downturns in China and Russia.
At the same time, US and European consumer spending was below expectations due to rocketing inflation, triggering rising central bank interest rates, and creating a vicious circle for business and consumers alike.
In these circumstances, supply chain disruptions will continue to ease, and freight rates also fall.
However, higher interest rates will inevitably have real economic costs.
Targeted government supports will be essential in the budget to help cushion the impact for small firms and vulnerable individuals.
However, government finances have been stretched by the pandemic and the need to meet climate action targets. There will be limits in what it can do.
- John Whelan is an expert on Irish and international trade