After two years of the pandemic and its complications, such as congestion in major ports and container shortages, the situation is finally improving. Exports from China are slightly declining as global buyers are forced to rethink their buying habits due to various factors, thus reducing the demand for goods imported from China. Falling demand has led to a drop in Chinese container prices.
Why were container prices high?
During the pandemic, more and more people had to change their daily routines and spend more time at home. The closed entertainment venues made it possible to allocate a part of the budget to purchase goods. However, as a large number of shops were also closed, people started shopping more and more online. This transformation to online shopping created a strain on securing freight from Asia, leading to record-high prices.
For instance, prices for a 40-foot container from China to Europe jumped from $2,000 a year ago to more than $15,000 in January. One container from Asia to Europe now costs about $5,000, an average of 65% less than at the beginning of 2022. The same pattern of prices presents from China to the UAE. Freight rates had shot up to around $1,100, but now the rate has come down.
However, this is still higher than pre-pandemic figures. The highest indicators were reached in September 2021, when prices exceeded the $20,000 level.
Why are container prices falling now?
First of all, the demand for goods from China is not as high at the moment as before. As inflation increases, people choose to get less clothing and electronics to afford basic necessities such as food and fuel. This situation is called in economics the income effect, where purchasing power decreases.
Secondly, people have changed their habits. They buy services instead of purchasing various items. After the pandemic, during which most people spent most of their time at home, many have reconsidered their choices and realized that possessions are not as valuable to them as experiences. Thus, they chose to buy, for example, a trip abroad.
That change in habits and purchasing behaviors affected the demand for Chinese goods. Also, with the zero-covid policy restrictions China imposes in vital locations, the prices of containers fell.
Will freight delivery costs also affect product prices?
Although container prices have decreased, we are unlikely to feel the impact on commodity prices. The reason is that product prices depend on the overall production costs. The final prices are not only determined by freight costs (transporting the product from China to UAE) but also by several other factors such as fuel, electricity, and labor costs. Those other factors in the equation entail high costs.
Another reason why goods prices are still the same, wholesalers often enter long-term contracts with transport companies. So, even if container rates decrease, the sellers must carry out transportation at the prices concluded in the long-term contract.
Container Shipping with Vervo Middle East
Vervo Middle East is a reliable freight forwarder under the Vervo Group for container transportation. We have been operating since 2008, covering over 120 countries.
Our logistics experts plan your bespoke shipping quote at competitive container shipping rates from China to the UAE.
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