Soaring container freight costs to ease but remain elevated: Rabobank

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Congestion, a major contributor to supply disruptions, is expected to remain at key ports across the world until the first half of 2023.
Camera IconCongestion, a major contributor to supply disruptions, is expected to remain at key ports across the world until the first half of 2023. Credit: Niels Wenstedt/BSR Agency/Getty Images

Soaring international container freight costs are pegged to drop over the next year, but Australia’s agricultural sector has been told to “never” expect a return to pre-pandemic lows.

Elevated shipping costs would remain for at least 12 months, according to Rabobank’s new Global Ocean Freight Outlook report, before “normalisation” could occur.

The report, released this week, forecast global prices would continue gradually declining over the next year from the “irrational high levels” of late 2021.

But a return to pre-COVID levels was impossible while the international container shipping industry grappled with a weaker global economy, higher operational costs, geopolitical uncertainly and imbalanced trade flows.

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Australia’s agricultural sector is heavily reliant on ocean container shipping for importing inputs including plant protection and machinery, and exporting goods such as meat, fruit and vegetables.

But the overall picture at home was positive according to RaboResearch Australia and New Zealand general manager Stefan Vogel.

“While we are not expecting ocean freight to return to normal for the sector here before 2024, we think it is going to get better for us in Australia, and many other parts of the world,” he said.

“But it is not going to happen tomorrow. It will be one or two years of ocean container freight rates tending to move slowly lower, while simultaneously reliability will improve, step-by-step, up to something closer to normal.”

While record high freight rates seen around the world over the past two years had already started to soften, the report found they remained three to five times above pre-2020 levels.

Mr Vogel said while it was unlikely freight rates would return to the “extremely cheap” levels seen before COVID-19, further extreme price rises were not expected.

“The overall picture is a rather positive one, where we do not expect to see those rates explode suddenly again or that there will be another massive disruption in the chain,” he said.

RaboResearch Australia New Zealand general manager Stefan Vogel.
Camera IconRaboResearch Australia New Zealand general manager Stefan Vogel. Credit: Supplied/Rabobank/Rabobank

Globally, long-term contract rates had risen significantly and remained elevated according to the report.

The reliability of ocean container freight schedules had dropped from nearly 80 per cent pre-COVID to about 30 per cent, amid ongoing disruptions and uncertainties fueled by port congestion and sluggish shipping capacity.

RaboResearch global supply chain analyst Viet Nguyen said shipping container prices were “never” expected to return to pre-pandemic rates of about $3000 US per container, though they would decline from the current $7000-8000 mark.

While heightened inflation and all-time low global consumer confidence levels were putting downward pressure on ocean rates, Mr Nguyen said rates were being supported at higher levels by imbalanced global trade flows, which hindered a cost-effective repositioning of empty containers.

“Added to this, geographical uncertainties are adding risks and there are also growing operational costs for the sector from higher energy costs and sustainability regulations,” he said.

The report forecast container schedule reliability would recover, albeit slowly, with congestion — a major contributor to supply disruptions — expected to remain at key ports until the first half of next year.

Though various processes had been implemented to improve efficiency, structural factors — including lack of co-ordination between ocean and land transport, labour shortages, disrupted trade flow, and a general lack of automation — continued to expose vulnerability at ports.

Mr Nguyen said strategic partnerships and long-term contracts with logistics services providers were important considerations for agribusinesses relying on international shipping.

“This can be key to ensuring service reliability and minimising disruptions to their supply chains,” he said.

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