The world economy continues to sputter along, but the news is not all bad—the slowdown is making it cheaper to ship goods by sea.
As a result, electronic OEMs and other players are paying only a small percentage of what they would have previously paid before the downturn.
According to analyst firm Karatzas Marine Advisors, the average pre-downturn pricing to ship a container from China to Europe, for example, was $1,500 to $2,000 dollars per container, compared to $500 per container today. Shipping prices from China and Asia to North America have fallen by similar magnitudes of scale.
Price hike fail
The pricing relief for shipping has also continued throughout the traditionally busy period during late summer and fall, despite higher pricing for some shipping routes. According to spot price checks and reports, some container shipping companies have managed to raise prices in the double digits while taking advantage of higher pricing for most routes. However, average pricing remains significantly below the average $1,000 per price increase per container shipped that was announced a few weeks ago, according to Reuters. Pricing has also hardly risen above historic lows reached in the summer.
Maersk Line: a case study
Future pricing also depends on moves the shipping companies will make. Maersk Line, the world’s largest shipping company with an estimated 15% market share of containers shipped worldwide, for example, has shaken up market dynamics by adding seven extra-large shipping vessels to its fleet this year. Its fleet now has 31 extra-large ships, the largest total in the world that have a carrying capacity of 18,000 containers.
Maersk Line can thus further reduce costs since its transportation costs are cheaper now thanks to the extra volumes. This could help it gain shares by becoming even more cost competitive versus the competition, especially compared to smaller companies. If other shipping companies follow Maersk Line’s lead, pricing could fall even further.
The outlook about when shipping prices might return to their pre-downturn remains murky at best for the shipping industry. Clearly, for the time being, electronics OEMs will continue to enjoy relatively cheaper pricing for the extended future, Karatzas said.
