Some good news, a rare occurrence these days. Freight costs have fallen dramatically. Some freight forwarders are now reporting $3,000 for a 40ft container from China to the UK. This is back to pre-pandemic prices. Last year, we reported the huge increase in shipping costs. Prices peaked at $20,000, for a 40 ft container from China to the UK. This was over 6 times higher than today’s price. For a large trading economy such as the UK, this could have a 1-2% downward impact on inflation. Importers can hope for some relief following energy price increases, exchange rate upheaval and the hiking of interest rates. The large build up in inventory, following the supply side shock during Covid, and the subsequent drop off in demand, as inflation bites, are the primary drivers in the collapse of freight prices. From a famine to a feast.
A significant fall in freight prices plus a recent significant strengthening in sterling against the dollar should have a material positive impact for importers. It also should impact consumer prices. Sterling has strengthened by 20% against the dollar since late September early October. Sterling is now trading at $1.21. If these changes remain it should have a material impact on inflation in the new year and hopefully stave off some of the more bearish economic predictions. Our Trade Finance product can help take advantage as well as manage the downside risk of the current volatility in the market place. For more information on how we can help support you or your clients business contact us.