Shipping prices and times are reducing, which is good news for UK importers

 

We said in our last post we had our busiest month on record in February.  Well March is on track to beat February’s numbers and the our business pipeline is showing no signs of slowing down.

As a front-end stock funder, our business can be considered a barometer for the confidence that exists at any given time in the UK SME market.  We are busy when UK SMEs are trading confidently and profitably, and we are quieter when trading conditions mean that UK SMEs put their stock purchasing plans on hold for a quarter or two.

Why are we so busy as the present time?

Well the OBR says the UK should avoid a recession even though overall growth in the UK economy will be very slow, and consumer confidence is holding up better than most commentators expected.  Employment remains at records levels and UK consumers are still spending on essentials.  This means that well managed UK SME’s are able to generate profits by working hard to source stock at sensible prices and get it into the UK market as quickly as possible for onward sale.

Changes in the container shipping marketplace are making a big impact too.

The main benchmark for shipping container cost is the Freightos Baltic index (FBX). This index measures the rates for shipping a 40 foot container (FEU) on the world’s 12 main shipping routes. The cost of an FEU has come down from more than $11,000 to $2,000, and is still falling.

Downward pressure on prices should continue as the orders placed for new ships during the pandemic begin to be delivered.  The new container ship order book currently stands at 30% of existing tonnage, with the majority of deliveries due to take place within the next two years. The launch of these efficient new ships will represent an unprecedented period of growth in the global shipping container fleet and should keep prices down and reduce shipping times.

Goods are already beginning to get here more quickly, with the Ocean Timeliness Indicator (published by Flexport) reporting that the FEWB shipping route (Asia to Europe) now averages 76 days, a two-year low. Still above the sub 60-day times that were the norm pre-pandemic, but the trend is going the right way.

The quicker our clients can get their stock into the UK, the quicker they can sell it on to their customers.  Everything we do here at Seneca is about helping our clients to maintain and improve their stock turn, whilst delivering growth in their business at the same time.

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