Australians can breathe a sigh of relief – shipping prices are now falling after burning shoppers with higher prices at checkouts in the past year.
Two leading freight indexes have reported falls in container prices of up to 11 per cent on major shipping routes over the past week in a sign the COVID-19 supply chain crunch has started to peak.
But it’s too late for shoppers to reap the benefits in time for Christmas.
Experts said consumers should still buy their presents early and expect to face goods shortages over the holidays, predicting shoppers won’t start seeing faster delivery times and cheaper goods until next year.
Shipping prices falling
It’s still positive news, though, after freight costs soared by 700 per cent in response to surging demand for goods during COVID-19 lockdowns.
Those costs flowed through to consumers in higher prices for goods and shortages of motor vehicles, some electronics and household furniture.
But after buckling under the pressure, global supply chains are ramping up as shipping businesses rush to make the most of the higher prices.
That’s starting to drive prices down.
China’s container freight index saw a 1.8 per cent fall in shipping prices to Australia and New Zealand last week.
Prices have been falling since early November after peaking last month.
The broader Freightos Baltic Index – which tracks prices routes from Asia to Europe and North America – fell by a much larger 11 per cent.
Reserve Bank governor Philip Lowe has been tracking the situation and said on Tuesday that the supply chain situation is starting to normalise.
He even suggested prices on some consumer goods might start falling as international supply chains ramp up to meet demand.
“A period of strong demand saw prices rise, which was recorded as higher inflation, but prices aren’t likely to keep rising at current rates as conditions normalise, and some prices may even decline,” Dr Lowe said.
No Christmas relief for Australians
There are still some wrinkles to be ironed out.
CEDA chief economist Jarrod Ball said although shipping prices are on the way down, there are still delays as COVID-19 outbreaks at overseas ports slow down container ships.
Delivery backlogs must also be cleared, which could take months, and a shortage of computer chips won’t recover until 2023 or 2024, he said.
“So this is not going to make it any easier for Christmas, but it certainly bodes well for 2022,” Mr Ball said.
Deakin University maritime logistics expert Peter Van Duijn agreed that the steep decline in container rates is too late to affect Christmas prices.
He said all of the items that will be sold across the holidays are already in the country or en route, so their prices are set.
Mr Van Duijn warned that Australia won’t be experiencing an immediate easing of prices and shortages despite the encouraging shipping data.
Australia is “small trade lane” compared to Asia and the United States, which “drive” most of the positive data, he said.
“Across the country, we only [process] eight million … containers for the year, while a port like Singapore or Shanghai might do that in a couple of months,” he said.
“We’re only a small piece in the global puzzle.”
Cleaning up the mess
So, what caused the supply chain chaos?
Mr Van Duijn said COVID-19 lockdowns led to people shopping more from home, which led to shipping price hikes and container and ship shortages.
“It was all a bit of a mess,” he said.
Commonwealth Bank data shows ecommerce spending jumped 35 per cent above 2019 levels in early August as New South Wales and Victoria endured lockdowns.
But as pressure on global shipping starts to level off, Mr Van Duijn hopes Australian markets will become more balanced over the next six months.
“We will hopefully start afresh again next year,” he said.