With plenty of discussion and focus on US imposed tariffs (which, at the time of writing applies to Australia, too) – it’s easy to assume that current market conditions aren’t working in favour of Australian businesses.
However, with global freight rates falling in recent weeks there may be an advantage to be had by those companies who are able to stock up on overseas goods now.
Continued geopolitical concerns, including the Trump Administration’s tariff policies and the potential resurgence of attacks in the Red Sea, combined with softening consumer demand during the traditional lull season in freight and logistics means there is currently more available space on vessels than there are goods to fill it.
We’re seeing this reflected in freight prices, with the Dewrey’s World Container Index more than 70% below the peaks of the pandemic.
If possible, businesses should try to use this to their advantage, with our general advice to clients being that if they have the financial ability and the space to hold stock, they should buy while they can.
While we’re not expecting freight rates to dramatically increase any time soon, experience tells us that what does down will come up, and rates will begin to rise again in the future.
Then when you consider current vessel availability, and minimal bottlenecks and congestion across the global supply chain, now is a good time to order.
Additionally, if you’re ordering stock you don’t require immediately, you could potentially book an even cheaper rate and not have to worry about goods arriving within a particular timeframe.
There are also other factors working in favour of importers;
- Shipping Times: Despite re-routing continuing in the Red Sea, for the most part, vessels are free-flowing and congestion and bottlenecks are at a minimum.
- China: Production in China is ramping up again following Chinese New Year, with suppliers also keen to offload goods to markets outside of the US, on the back of recent Trump-imposed tariffs. Suppliers in China are currently willing to negotiate, meaning there’s an opportunity for favourable contract terms and the potential to secure goods at a cheaper rate.
- Interest Rates: The Reserve Bank’s decision to cut interest rates in February will likely provide some financial breathing room and bolster confidence for businesses and consumers.
It’s worth noting that the lower freight rates won’t necessarily translate to lower shelf prices, as there are other supply chain costs that need to be factored in, including the weaker Australian dollar and higher landside charges.
However, there is still a strong advantage in current conditions.
We often advise clients that the best way to avoid being caught out by congestion and potential price increases is to plan ahead where possible.
This is one such scenario where if you have the ability to order and hold stock now, you could potentially be ahead of the curve and find yourself in a strong position when peak season returns.
