Container rates stabilise, with growers reaping the benefits

International freight booking and payments platform Freightos has estimated some container rates are at their lowest levels in at least seven years.

The lower prices come at a time of increased demand, particularly for lentils, which is good news for smaller producers, says one Winchelsea grain and pulse handler.

Southern Grains Storage director Campbell Brumby, Winchelsea, said the company's packing schedule was increasing by the week, reflecting the greater affordability of container rates when compared with bulk sea freight.

"The gap between bulk freight rates and container rates has closed considerably, and it's kick started the container packing demand significantly," Mr Brumby said.

Mr Brumby said the company had been processing old crop lentils through October and would start exporting faba beans and canola in about a month's time.

Beans would be exported to India, which was also taking lentils, as well as Egypt and Bangladesh.

He said containerised products opened up the market to smaller growers.

"It increases demand and competition - when it's only the major exporters (who have the capacity to do bulk vessel cargos) it limits that to the top half dozen players," Mr Brumby said.

"When the next tier of traders come in, who are only looking to do 500 tonne parcels in containers, it means increased competition.

"They are paying very good money for lentils, on farm, at the moment - the demand has increased and some import tariffs into India have been reduced.

"There has been a lot of inquiry that has sprung up, that six or eight months ago wasn't there."

He said growers were benefitting, due to the increase in competition and cheaper shipping rates.

"Growers have been sitting on tonnes of product and they have a trigger price they will sell at," he said

"We have seen the increase in price for lentils really shoot up and a looming harvest, so they have to free up some space."

Australian Red Lentils portfolio manager Todd Krahe, Minyip, agreed container rates had dropped sharply since the beginning of the year.

"If I take one of the major lines for one our main trade routes - Melbourne to Kolkata - rates have decreased by about 70 per cent since January," Mr Krahe said,

"Rates are not the lowest they've been in the last seven years, in our case, but all trade routes and lines are different."

He said more equipment had come on line as the big shipping lines had built more containers and vessels.

"We are also coming out of COVID-19 as well, there is not such high demand on limited shopping routes, such as China and Europe and China and the USA, which was taking all the containers."

Australian Red Lentils had moved away from its reliance on bulk shipping, to now sending 50 per cent of its products by bulk transport and 50 per cent in containers.

"The general rule of thumb is bulk shipping should be 25 per cent cheaper, but at the moment they are about on a par."

That translated to better prices for growers, as when exporters needed to buy a shipment for a bulk vessel, they would only purchase lentils every two months.

"We stop buying until the next shipment and there is no in-between - but with containers we are constantly buying."

He said it also reduced the number of trucks on the road, with containers going out through Dooen to the Port of Melbourne.

"Our bulk trade is 100 per cent road freight, between Minyip, Portland and other sites - that is 30,000 tonnes at a time, which is a lot of truck movements."

He said packers were facing costs that were 10-15pc higher than pre-COVID levels, particular in freight, fuel and port charges.

There were also issues with equipment availability, he said.

"We are frequently facing delays in empty containers being released or having to accept lower quality boxes just to meet shipment cut-off dates," he said.

"This problem should continue to improve though as more containers and vessels that were manufactured in the last couple years come online."

Agri-Oz Exports managing director Francois Darcas, Melbourne, said container rates were down sharply from their peak, hit during COVID-19.

In some cases, they went up by 200-300pc during the pandemic.

"When container rates were very high, the market redirected a lot more tonnage to bulk shipping, especially pulses, which are more likely to be shipped in containers," he said.

"It will be interesting to see if that trend is here to stay, or whether containers come back.

"In the meantime, some importers have discovered they can import in bulk and they can invest a little bit on port storage or group together to build handling facilities."

It was more efficient to ship grains and pulses in bulk, he said.

"There has been a lot of investment in light, mobile ship loading assets, which opens the door for more bulk shipments, particularly smaller ones."

In the last few years there had been large pulse crops, which created the opportunity for exporters seeking to ship more product.

They then turned to bulk shipping, rather than containers, he said.

"Containers are very labour intensive and there are bottlenecks, at the moment there is industrial action at (stevedore) DP World, so there is always some problem in international shipping."

Freight and Trade Alliance International Freight & Logistics head Tom Jensen agreed the latest prices were coming off a very high base.

"Whilst 90pc might sound high, (that's) compared to the peak high prices during COVID-19, due to impacts on shipping during the pandemic," Mr Jensen said.

"Rates were then exorbitantly higher than what we expect in stable market conditions."

Rates were now back to pre-COVID levels and predicted to drop a further 33pc, in 2024, according to Drewery maritime research consultancy.

The latest Drewery World Container Index of $1364 per 40-foot container was now 4pc below the 2019 rates and the lowest in three years.

"With global container shipping demand forecast at just 2pc growth in 2024 and carrier fleets expected to continue as supply exceeds demand, shipping lines will struggle financially unless the demand grows," Mr Jensen said.

But he said carriers were now trying to "blank" or cancel sailings, to balance the supply and demand and raise freight rates.

That was not a "successful" strategy, due to lower than normal demand, he said.

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