Australia Misses Out on Global Drop in Shipping Costs

Freight costs from Asia to Australia are rising even as global shipping rates fall, driven by shifting trade routes and increasing tariff tensions. While freight charges to major destinations such as the US and Europe have dropped by over 50% in the past year, Australia is seeing a reversal, adding pressure to retailers and consumers already grappling with inflation.

Worldwide, container shipping costs have declined sharply in recent months due to reduced demand and changes in trade flows. The Drewry World Container Index, a key measure for the cost of 40-foot containers, has fallen by half over the last year. The drop is linked to intensified US trade policies, with the Trump administration planning a 30% import tariff on goods from the EU and Mexico starting in August. As demand for shipping to the US weakens, freight rates between Asia and cities such as Los Angeles and Rotterdam have dropped by as much as 61%.

In contrast, Australia has been excluded from the global trend of falling costs. Instead of reductions, freight rates for containers coming from Asia are climbing. Shipping lines have introduced general rate increases, peak season surcharges and so-called rate restoration schemes. These are strategies used by carriers to improve profit margins, particularly in markets like Australia where competition is relatively low and price hikes are easier to enforce.

Shipping companies are also modifying their operations to support these pricing strategies. Some have started replacing large ships with smaller ones on routes to Australia. This helps control capacity and maintain higher rates. In addition, blank sailings, when ships skip planned port calls, are expected to increase globally by 25% in August. This includes moves by companies such as the Mediterranean Shipping Company, which is scaling back less profitable trans-Pacific services.

Steepening freight costs are also creating difficulties for Australian exporters. With potential price hikes on US global import tariffs, sectors including metals and pharmaceuticals face more uncertainty. Although the average US import tariff per container recently dropped to 21% from April’s 54%, the long-term direction of trade policy remains unclear and could threaten Australia's export competitiveness.

Port data suggests the impact is already being felt. At the Port of Melbourne, container volumes fell to 345,000 in the first quarter of 2025, down from 378,000 in the previous quarter. While global freight volumes are expected to keep declining, Australia seems to be stuck dealing with inefficient regional shipping routes and unfavorable economic shifts.

Source: Australian Financial Review, Drewry, U-Freight, Freightos

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