The Impact of the Massive drop in China Shipping Rates.
The shipping freight rate from China on most routes into the West have at least halved over the last few weeks. Will it last and if so for how long?
The reason for the drop is threefold.
Primarily, the amount of goods being shipped from China has dropped dramatically over recent months and as with any supply and demand relationship the less demand the lower the price. This demand is not likely to increase for quite some time and may in fact reduce yet more.
Secondly, the impact of the supply and demand effect has to some degree being reduced in the past by the ‘cartel’ or ‘conference’ of freight providers who agreed, controlled and set prices. This cartel has now broken up and now as in almost every other business in the world people are fighting for the work. Again this is not likely to change any time soon.
Finally and fairly obviously, Oil prices have halved and the beneficial impact on shipping costs is huge. It is not suggested by pundits that the price of oil will return to the dizzying heights of a few months ago therefore once again no change likely here.
In summary, I see no reason why shipping rates will change significantly any time soon.
This is extremely good news for anyone importing bulky products from China and will go some way towards alleviating the damaging currency conditions. The Chinese Government have also acted swiftly to increase tax rebates from 5% to 13% on some household furniture items. Suddenly, products that may not have being economically viable to import due to their bulk in the past are viable now.
Expect to see lots of Chinese manufactured cheap, bulky, household furniture products in the shops any time soon.