Stacks of shipping containers at the Port of Oakland on May 20. Justin Sullivan/Getty Images

Costs for shipping goods in containers have been dropping since March, though experts say it’s too early for retailers to celebrate as congestion in the global supply chain lingers and consumer spending shifts.

During most of the past two years, the costs for transporting shipping containers ballooned as people altered their purchasing behaviour to favour physical goods. Now, consumers are increasingly spending their disposable income on services rather than household items and reacting to climbing interest rates.

Since March, prices have tumbled by 19 per cent, according to two shipping-container indexes.

Global events including Russia’s invasion of Ukraine and lockdowns in China have also reduced the number of shipping containers in use, freeing up supply. As a result, the containers are down to their lowest prices since June of 2021, according to Drewry Shipping Consultants Ltd. Similarly, the Freightos global container freight index shows container prices in the midst of a comparatively steep decline.

Port bottlenecks and land transport delays, however, continue to slow the price decline. Yet prices remain high compared with prepandemic levels. At US$7,635 for shipping a 40-foot container last week, Drewry’s composite world container index is still five times higher than in the spring of 2020, when the pandemic led to a slowdown in global trade. Prices typically floated between US$1,200 and US$2,000 for several years prior to the pandemic.

Global events, including the current lockdowns in China and the war in Ukraine, are partly responsible for the cut in prices, said Edy Wong, a supply chain professor at the University of Alberta who studies shipping rates. Both events have resulted in fewer products being shipped, reducing pressure on container supply and bringing prices down.

Annual trends are also at play: May and June are typically the cheapest months of the year to ship products before retailers start ordering stock for Christmas at the end of the summer, he said.

After two years of expensive shipping costs, cargo companies have prospered – in some cases doubling their revenue year over year – while retailers have struggled to find adequate shipping capacity as their margins thinned. That trend is finally starting to reverse, some retailers say.

Jennifer Foti, director of distribution and logistics at Umbra, a Toronto-based interior-decor company, said the decrease in container costs have been notable. Umbra is one Canadian company that imports and exports its products through the Port of Vancouver.

“It really has gotten easier,” she said. “When containers were difficult to get a hold of, our team was working at midnight to try to book a spot to get empties. Those times are behind us.”

While prices remain far from consistent, her company has taken advantage of falling rates with new shipping contracts, which allow for shipping a certain amount through a fixed rate, and the rest at the prevailing rate to “play the market a little bit,” she said.

Indeed, indexes may not reflect local price differences, according to Mary Brooks, professor emerita of transportation at Dalhousie University. As a result, retailers may be quoted different prices “depending on the direction of the trade flow, depending on the ports called, the business type, and that point in time when the booking is made,” she said.

While the costs of containers themselves are coming down, other issues continue to affect shipping. One is long delays to unload goods, said Michelle Wasylyshen, spokesperson for the Retail Council of Canada.

With boats waiting offshore to be unloaded at transport hubs such as the Port of Vancouver, she said, products that would normally be in transport for two months are now taking four or five months to arrive at their destination.

Processing times are slowly improving in Vancouver after extensive damage to roads and rail systems by flooding in November in B.C.’s Fraser Valley and Southern Interior. The Port of Vancouver’s “dwell time” – how long it takes before goods are transferred from container terminals by trains to warehouses – has shortened since floods and mudslides in British Columbia damaged or destroyed large sections of railway tracks near Vancouver in mid-November.

This week, the typical dwell time for imported goods to spend on dock at Canada’s largest port has been between five and seven days, compared with more than seven days in late November and in December.

That’s still slower than normal. Before disruptions to the world’s supply chain because of the COVID-19 pandemic, imported goods usually spent three or fewer days on the dock.

“I don’t want to say we’re returning to normal in short order, because just the way the world is rolling right now it seems like when we’re heading in the right direction, there’s often new challenges thrown at us,” said Peter Xotta, vice-president of operations and supply chain at the Vancouver Fraser Port Authority.

Repairs to rail lines and highways in and out of Vancouver took nine weeks. Even though the port added temporary storage for empty containers in the Vancouver suburb of Richmond earlier this year, bottlenecks persist.

Whenever there are trade disruptions on the West Coast, it creates far-reaching delays that stretch eastward all the way to manufacturers on the Prairies and into Ontario and Quebec.

At North American ports, ships at anchor remain a common sight, though there are fewer vessels waiting compared with last fall. Ships are still unable to quickly find a berth time slot because of the inland snarls.

This means that seasonal products could miss their sales window, and storage costs could mount. Indeed, China COSCO Shipping Corp. Ltd., a Chinese state-owned carrier, doubled its 2020 revenue to US$51-billion last year, although costs – attributed to greater waiting times and fuel expenditure – also rose by a third last year to US$30-billion.

Over all, just-in-time inventory is a thing of the past right now, Ms. Wasylyshen said. “Shipping costs are still expected to be expensive for the balance of the year and beyond.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Follow Brent Jang on Twitter: @brentcjangOpens in a new window

Build your personal news feed