Shipping is very price-sensitive. The volatility in global markets and the fall in price of key commodities such as oil & steel have left shipping with an over-capacity. With supply outstripping demand, shipping prices are volatile.
For exporters this should be good news. Except of course that it is not that simple. The very volatility of shipping prices makes them unpredictable. So while they remain low, budgeting for them is difficult from one week to the next.
Chris Houghton, Managing Director of Stockport-based, Freedom Logistics, explains why low shipping costs are not indicative of a healthy export market. “Gaps between supply and demand have widened”, he says, “and shipping lines are trying to fill capacity at the expense of their competitors. This creates an artificial price-distortion”.
Shipping Prices and the Impact on the Economy
This distortion adds to the overall volatility of the economy, and has the potential for causing shipping activity itself to falter. If shipping lines are finding their journeys to be non-profitable, they are more likely to cut them altogether, thus removing excess capacity.
Individual missed sailings will not have a global impact on shipping prices, but they contribute to the unpredictability of the business. And to the difficulties exporters can face when trying to deliver on their export strategy. In short, shipping is not plain sailing.
The best way for exporters to cope in shipping’s turbulent times is to work closely with a trusted freight forwarder. Freight forwarding services are designed to make the shipping process easier and quicker, handling everything related to it on behalf of exporters.
“Forming a good, solid freight forwarding partnership is more than worth its weight in gold”
“When it comes to times like these where prices keep fluctuating, professional guidance will go a long way to ensuring that exporters can make the most of spare shipping capacity”, Chris concludes.
What it comes down to is having a clear understanding of all the implications for shipping’s current low prices and capacity outstripping demand. Because, for every price reduction, there could be uncertainty around the actual supply chain as shipping schedules become less reliable.
If you would like to discuss your freight forwarding needs, please call Freedom Logistics on 0161 660 9126.
Alternatively, Freedom Logistics have produced a free volatility report, which reveals;
- Why you can end up paying more – even in a falling market
- What is going on – what is causing the big swings?
- What you can do to ensure that you’re getting the best value
You can download the report by clicking here.