•The increase comes amid disruption in key trade routes, where tension in the Red Sea has seen shipping lines re-route to the cape of Good Hope, avoid the Suez Canal.
•According to the UN Trade and Development, approximately 15% of Kenya’s foreign trade (by volume) is channeled through the Suez Canal.
Image: FILE
High global container prices are now threatening to push up the cost of imports to Kenya and the East African region, in what could wipe-out gains from the much stable shilling.
In China, which is Kenya’s biggest import source, container trading prices have gone up compared to last year, amid increased demand and geopolitical tensions that have disrupted international trade.
Rates at most ports in China are averaging between $2, 052 (Sh275,994) for a 20-foot container and $2, 294 (Sh308, 543), compared to $1, 662 (Sh156,289 ) and $1, 833 (Sh159,113) same period last year (April).
There has been an overall increase in prices over the year with Dalian, Ningbo, Qingdao, Shanghai, and Xiamen, recording high prices, market data indicates.
This comes amid strong container trade patterns between China and other key trading routes.
The high prices have defined earlier projections of a drop of between six and 18 per cent in April, where a higher percentage of decline was expected in Asia, leading import source for Kenya.
According to the Container Price Sentiment Index by Container xChange, a technology firm that offers container trading and leasing platform, a year-to-date analysis of global container leasing transactions shows a notable uptick in average rates.
This is since the beginning of 2024, indicating an uptick in demand for container leasing services and increased financial burden on lessors, pointing to a potentially tighter market.
The study also highlights persistently strong container trade patters between China and Russia, Taiwan and India, China and India, amongst other hot trade routes so far in this year 2024.
“Fluctuations in both demand and supply lead to significant volatility in container logistics. Currently, we see a widening gap between demand and supply, with demand subdued and supply high due to a whiplash effect from orders during the 2020/2021 period,” Christian Roeloffs, cofounder and CEO of Container xChange, said.
This leads to (over)supply effectively absorbing disruption shocks and keeping container prices subdued, even as operational costs continue to rise.
“One-way leasing rates, on the other hand, are mainly driven by increasing financing costs and differences in container prices between origin and destination. This leads to example, China-US leasing rates to increase on the back of a widening container price delta,” Roeloffs noted.
The increase comes amid disruption in key trade routes, where tension in the Red Sea has seen shipping lines re-route to the cape of Good Hope, also avoiding the Suez Canal.
Any disruption in the maritime industry impacts global trade as theinternational shipping industry is responsible for the carriage of around 90 per cent of world trade.
According to the UN Trade and Development (UNCTAD), approximately 15 per cent of Kenya’s foreign trade (by volume) is channeled through the Suez Canal, while that for Tanzania is about 10 per cent.
With the two countries also having the only seaports in the region, it means landlocked countries in the East Africa Community are affected.
Also affected is Sudan which depends the most on the Suez Canal, with about 34 per cent of its trade volume crossing the Canal, and Djibouti whose 31 per cent of foreign trade is channeled through the Suez Canal.
Re-routing of vessels by global shipping lines translates into longer cargo travel distances, rising trade costs and insurance premiums, meaning with higher container leasing prices, overall freight costs are set to shoot.
Kenya heavily depends on China for her imports where the country imported goods worth Sh452.6 billion from the Asian country in 2022, the Economic Survey 2023 indicates.
Key imports include electrical, electronic equipment, machinery, nuclear reactors, plastic, footwear, ceramics and railway equipment.
Despite the costs and logistical challenges, the Shippers Council of Eastern Africa (SCEA) is optimistic about a strong international trade performance this year despite the geo-political tensions .
“Shippers are encouraged to plan their imports and thus help reduce the storage costs paid and which is a reflection of inefficiency on the part of the shippers and service providers,” acting CEO Agayo Ogambi said.
According to the SCEA, the disruption in the Red Sea and Suez Canal has had a major impact as vessels re-routed through West African maritime route, while others call at Djibouti to avoid going through Suez.