•According to the Shippers Council of Eastern Africa (SCEA), there has been an increase in vessel availability, which has corrected prices.
•Dubai-based global logistics company DP World foresees freight rates dropping by a further 15 per cent to 20 per cent as demand slows.
Freight costs in the shipping industry have fallen by up to 50 per cent in key trading routes, shippers have reported, setting the ground for cheaper imports into Kenya and the region.
This is after more than one year of high prices, which spiked in 2021 when global trade witnessed a vessel and container shortage in Africa and other low volume import-export regions.
After a slowdown at the height of the Covid-19 pandemic, in 2020, the following year saw a resumption of trade between China, Europe and the United States–the world's largest producing and consuming economies.
High demand for vessels in the markets slowed down shipping lines’ activities in some regions, among them the East Africa.
During the period, international freight charges went up by between 20–25 per cent, with shipping a container to Mombasa then costing up to $12,000 (Sh1.4 million).
This eased to an average $7,000 (Sh869,344) last year as supply to the markets increased.
According to the Shippers Council of Eastern Africa (SCEA), there has been an increase in vessel availability, which has corrected prices.
“China freight has fallen from a high of USD 7000 to almost half of between USD3500 and 3800,” SCEA chief executive Gilbert Langat told the Star on telephone.
This is about Sh434, 672 and Sh 471, 929.
It comes a relief to local manufacturers and traders who import raw material and finished goods, and those in the export business.
The prices are projected to further drop as both the World Bank and the International Monetary Fund (IMF) project reduced economic activities this year, slower growth forecasts amid the expected global recession.
IMF managing director Kristalina Georgieva predicts one-third of the world’s economies will slip into recession in 2023, with the biggest impacts being felt in emerging and developing economies.
She sites the Russia-Ukraine war and changing Covid-19 pandemic policies as among reasons.
“Growth is projected to start recovering in 2024 and return to a subdued trend rate of around 1¼, reflecting adverse demographics and low productivity growth. Risks are skewed to the downside given uncertainties related to the war,” the IMF board said in a statement on Monday.
Dubai-based global logistics company DP World foresees freight rates dropping by a further 15 per cent to 20 per cent as demand slows.
Shipping group Maersk has also warned of slowing demand for transport and logistics as a global recession looms.
It foresees global container demand falling by up to five per cent this year, citing an unfolding economic slowdown expected this year.
“Freight rates are coming down faster than expected and the global container market will be broadly flat to negative in 2023,” Maersk says in an outlook report.
The weak shilling against the US dollar is however expected to deny importers in Kenya full benefits of the falling freight costs, as they continue to spend more to buy and import.
This means consumers in the country should also not expect a significant drop on commodity prices, as local manufacturers balance between the dollar implication and cost of production in the country, mainly high electricity bills.
The local currency has averaged Sh124 to a unit of the dollar in the past one week, with some banks selling it at above Sh130.
“We expect the shilling to continue depreciating as rising inflation pushes up the cost of living in a country that is dependent on imports, including fuel, machinery, medicine, food and clothing,” notes Terry Karanja, Senior Treasury Associate at currency trading solutions provider, AZA Finance.
Inflation in the country has remained high since mid-last year, hitting a five-year high of 9.6 per cent in October, before easing to 9.5 per cent and 9.1 per cent in November and December, respectively.