SHIPPING costs are falling, bringing relief to hundreds of manufacturers burnt by the higher prices to import goods in containers. The prices, however, remain elevated and is yet to decline to pre-pandemic levels.

Sharing the development in a tweet, CEO of Seprod Group of Companies Richard Pandohie stated (sic), “Reporting positive news on shipping cost..price has been coming down, now at around US$10k-$11k /40ft container, still above pre-pandemic level of $4-5k but also way below the $18-$20k peak of last year.”

When the Jamaica Observer reached out to Pandohie, a past president of the Jamaica Manufacturers and Exporters Association (JMEA), for context, he pointed out that it was the experience of those “bringing in containers from China”.

“The situation is highly volatile, so it’s hard to say how long it will last but it certainly depends on the extent of COVID spread and lockdown in China,” he added.

Pandohie further explained that the lockdowns in Shanghai to contain a surge in COVID-19 cases has resulted in the decline in manufacturing and, by extension, defused a “bidding war” for cargo space on vessels that contributed the rising cost of freight.

Though he directed this publication to the Shipping Association of Jamaica (SAJ) for data, a representative of that organisation responded that it would not have that information at this time.

However, a report from www.marketplace.org, dated April 5, 2022, has confirmed the reduction in freight costs.

“Since the start of the pandemic, the cost of shipping has increased significantly. In the past month, however, container shipping costs have fallen by about 12 per cent, according to the Drewry World Container Index,” it stated, attributing the decline to “the spike in COVID-19 cases in China last month”.

Quoting Simon Heaney, senior manager of container research at Drewry, the Marketplace report said the lockdown of the Asian superpower’s ports and manufacturing hubs has “created a supply outage”.

“If you’re not able to move goods, it’s meaningless,” he said, adding: “So the ships will be idle, there’s not enough goods for them to move, and therefore freight rates come down.”

According to the Drewry’s composite World Container Index of April 7, freight cost for 40ft container from Shanghai to the US decreased by 1.4 per cent to US$8,041.50, though it remains 64 per cent higher than a year ago.

“Drewry expects spot rates to remain stable in the coming week,” the company said on its website.

Specifically, the freight for a Shanghai–Los Angeles shipment dropped three per cent or US$288 to US$8,824 while a Shanghai–New York shipment was $11,303, falling by two per cent or $228.

International freight booking platform Freightos attests to this trend, indicating a marginal contraction in ocean freight rates.

“So far, ocean rates to the US have remained stable despite the current outbreak, down by just three per cent since the outbreaks began. This dip could be due to the drop in available goods. When operations rebound, there could be a surge in shipments and possibly an increase in rates,” the company said in a blog post.

Still, the reduction in freight cost has created a conundrum for importers as the fall-off in manufacturing in China means that they cannot purchase goods in the quantity they want.

In this regard Pandohie told Business Observer, “We continue to struggle to get goods.”

He underscored that though some companies had bought a lot of goods, the last two years have taught them to have a buffer quantity in case of supply shortages.

However, the Marketplace article asserted the opposite is taking place in the US, pointing out that consumer demand has been slowing, leaving retailers who loaded up when supply chains were even more congested with more inventory than they bargained for now.

“And so we don’t need to place the normal orders that we would probably be placing right now in March and April, because we have so much stuff left over from December, January and February,” Zac Rogers, a professor of supply chain management at Colorado State University, shared.

Hope for exporters

But with the cost of ocean freight between China and the Americas still at a high, exporters in Jamaica can look to capitalise on nearshore opportunities.

Just last week, president of the JMEA John Mahfood told a virtual gathering of the Lions Club of New Kingston that with shipping costs to countries in the Caribbean remaining the same, it presented an opportunity to maximise exports and reclaim markets from the Middle East and Far East.

“We’ve seen how companies locally have taken advantage of low shipping costs,” he said, pointing out that Boss Furniture and FosRich Group of Companies have shipped goods to Barbados under the Export Max III programme in the last year.

“My hope is that the Jamaican manufacturing companies will now see the benefit of exporting now that we have that competitive advantage edge and realise that counting on our three million population with US$5,000 per capita income is not a basis for growing your company,” he continued.

The JMEA president further argued that it was an opportune time for Jamaica to develop strategies to deepen intraregional trade given its vulnerability to global shocks and the risk such shocks pose to extra-regional trading partners.