Just over three years ago Covid struck and the country – like most of the world – went into lockdown. Much has happened since then, including marked disruption to many markets, both domestic and global.
Vehicle manufacturers struggled to get the components they need to meet demand; there’s a mismatch in food production and demand – but that is also a function of Brexit and the war in Ukraine; and the cost of shipping goods hit an astronomical peak.
It’s the latter point that’s particularly interesting. Take Drewry’s composite World Container Index. It measures the bi-weekly ocean freight rate movements of 40ft containers in seven major maritime areas; its data is expressed as an average price per 40ft container (in US$).
Back in early December 2019 a container cost around $1450 – a relative low over the preceding two years which saw peaks of $1800. But this was nothing as rates, which initially were stable around the $1800 mark, rose, almost exponentially – barring a flat quarter at the start of 2021 – to a stratospheric $10400 in September 2021.
But since the world started to reopen in February 2022, albeit in stages, the price has dropped back to the (new) norm of around $2000.
So what happened? Well it’s important to recognise that the 2021 peak was purely the result of a dysfunctional market where ports were either closed or running at below efficiency; containers were invariably stuck where they were needed least and resurgent demand left firms wanting to move goods paying whatever it took.
90% of containers are made in China – a country stuck in perpetual lockdowns – and it was unable to meet the new demand. It didn’t help that because the cost of shipping was low few new containers were ordered. Thus, when demand for containers spiked the global economy was faced with the classic supply and demand problem as prices rose.
All of this taught firms moving goods around that maybe, for the short term at least, paying spot rates for freight is likely to prove a better bet than signing long term contracts. Similarly, shipping companies are having to rethink their operations to cut costs and change tack as lower prices mean lower revenue. Maersk and MSC are two such firms. They established an alliance in 2015 to share cargo on major ocean routes prompting competitors to create similar partnerships. However, this will cease in 2025 to allow each to pursue individual strategies. Maersk wants to focus on becoming a complete logistics provider, while MSC has been increasing the size of its fleet.
In other news, a new Northern Ireland Brexit deal was signed by the UK and EU at the end of February. Without delving into the politics, under the existing arrangement, all goods destined for either Northern Ireland or the Republic of Ireland are checked on arrival for compliance with EU import rules. Only after checking can goods move on to the Republic. Under the deal, just as with passengers leaving the baggage area in an airport, so goods landing in Northern Ireland for destinations in the province will exit a green lane unhindered. However, goods for the Republic will go through a red lane for checking.
In essence red tape and export requirements will be minimised, if not abolished, and goods on sale in Great Britain will be more freely on sale in Northern Ireland.
A further change was made to the Northern Ireland Protocol so that while elements of EU law applies to the province, local politicians will be able to influence their application and, with UK government approval, seek amendment.
Of course, whether this is enough to get the Unionists back into Stormont and the devolved government up and running is another question.