DROP

Relief for traders, consumers as global freight costs ease

This comes as vessel and container availability improves.

In Summary

•Rates had risen by up to three times in the first half of the year amid a shortage of vessels and containers.

• A drop in freight charges likely to see easing of commodity prices, a relief to consumers. 

MV MAERSK CAIRO, one of the largest container vessels in the World, at the Port of Mombasa/FILE
MV MAERSK CAIRO, one of the largest container vessels in the World, at the Port of Mombasa/FILE

Global shipping charges are on a decline after due to easing in the shortage of vessels witnessed at the height of the Covid-19 pandemic.

This signals s drop in commodity prices that had been driven up by high importation costs which traders passed on to consumers.

According to the Shippers Council of Eastern Africa(SCEA), charges on shipping a container from key ports in Europe and Asia has dropped by about 29 per cent in the past two weeks, a trend expected to be witnessed into the end of the year.

Rates had risen threefold in the first half of the year and shipping a container to or from Mombasa to Europe would cost up to $12,000 (about Sh1.3 million).

This was mainly driven by a shortage of vessels occasioned by the re-opening of leading economies after a slowdown at the height of the Covid-19 pandemic.

There has also been retirement of old vessels and servicing of ships that impacted availability, SCEA notes.

Road freight rates between Mombasa and neighbouring countries had also gone up to between $3,500 (Sh 388,850) and $4,500 (Sh499,950), from between $1,800 (Sh199,980 )and $2,200 (Sh244,420).

High trade volumes between China, the US and Europe in the wake of re-opening of economies saw most shipping lines schedule vessels on high demand routes, leaving a few smaller vessels to serve Mombasa and the East African region.

Demand for empties in China, a key global exporter, had also impacted logistic charges, industry players say.

Easing of orders in Europe and the US has however seen availability of containers and vessels, which has led to a reduction in freight costs, SCEA chief executive Gilbert Lang'at said yesterday.

He spoke during the launch of the council's Strategic Plan 2022-2025, aimed at strengthening partnerships with governments and private sector for growth of the shipping industry and international trade.

“Going into the Chinese New Year, activities are expected to reduce and this means a further drop in freight charges but we will not get back to where we used to be. It will remain high compared to pre-Covid,” Lang'at told the Star in an interview, on the sideline of the event.

Importers of finished goods and manufacturers of raw material have traditionally passed extra costs to consumers, reflecting on the cost of living in the country where taxation is equally high.

According to the Kenya Association of Manufacturers, high costs of production, raw material costs, finished goods imports, exports and increased cost of shipping remain a major determinant in final commodity pricing.

The latest developments mean retail prices of imported goods is likely to drop if the benefits are passed to consumers.

Industrialisation, Trade and Enterprise Development CS Betty Maina has affirmed government support for the logistics industry.

We acknowledge logistics is one of the most crucial components in the quality of any supply chain. It creates and increases the value businesses offer by improving merchandise and ensuring the availability of products for production as well as consumption,” CS Betty said at the launch.

Some cited the expansion of Mombasa Port into a regional Port, development of the Lamu Port South Sudan, Ethiopia Transport Corridor (LAPSSET), Kisumu Port, Inland Container Depots and expansion of road infrastructure as some of the measures taken to support the logistics sector.

Other measures include KRA's Integrated Customs Management System (iCMS) for cargo clearance, the National Electronic Single Window System by KenTrade and the Kilindini Waterfront Automated Terminal Operation System (KWATOS) and Terminal Operating System (TOS) by Kenya Ports Authority.