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In 2021, the international freight market has seen various disruptions that have led to container prices skyrocketing. It was recently announced that a company would have to pay an ocean carrier a record $32,000 if they wanted to move containers to Los Angeles from Shanghai, China. The prices have gotten to a point where they are too high for some companies to afford. Certain importers that usually depend on cheap shipping are being priced out and are having to make difficult choices.
Larger companies that import more expensive products may be able to keep up with the growing prices, but smaller companies may be soon forced to look for different solutions. This could mean importing freight from different countries that may offer a cheaper price per import. Another resolution that some companies are being forced to do is to put a hold on part of their inventory. This means that fewer imports would come in which could help save capital. The downside is that this may limit the potential profit.
The Effect of Fright Shipping Delays on Companies That Ship
To accompany the rise in shipping prices, the delays in freight shipping seem to be persistent as well. A potential reason behind this is that the rate that the customer is spending has gone up, partially in North America. This is creating the need to borrow equipment such as containers from other places in the world. The result is a scarcity that may create port congestion and keep the delays going.
To combat the delays, Companies are choosing to order their freight much earlier than before, so it arrives on time. With the freight demand increasing, many vessels are quickly filling up in terms of capacity. This puts pressure on the shipping rates and causes them to rise. It has gotten to the point that carriers had to call off shipping journeys to reschedule and keep up with the load.
Global Supply Chain Impacts in the Last Few Weeks
The rise in container prices can be traced back to different disturbances in the supply chains of the international freight market. Situations such as the coronavirus pandemic, the Ever Given ship being stuck in the Suez Canal and container shortages have strained supply chains and rose freight prices over the last year. However, in the last month, more situations have added to the strain.
In the past weeks, a new coronavirus variant named delta has been making its presence felt global. Individuals who have previously been vaccinated have been reporting positive cases. Seaports around the world are reporting that they are understaffed due to the virus. Ports in Vietnam and Malaysia are currently dealing with freight backlogs because of lockdowns, and this may worsen as the holiday season approaches.
In China, an already delayed port area is currently dealing with typhoon In-fa. Asia is not the only area that is dealing with supply chain delays. Other small disruptions are having their own small-scale impacts which have a compounding effect globally. Ports in South Africa are being forced to shut down because of violence due to the incarceration of Jacob Zuma; the former president. In Canada, the Port of Vancouver has been experiencing railroad freight container delays due to nearby wildfires. The current increase in container costs is the aggregate of all of these situations in the past month and year.
Will Prices Ever Return to Before Covid Amounts
With analysts predicting that container rates will rise in the coming weeks and months, it could take a while before container prices start decreasing. Some shippers believe that it may take more than a year for prices to return to pre-covid amounts. This could be because the amount of shippers importing, and exporting is growing fast compared to the number of vessels and containers available. The freight ships that are currently being built may take well into 2023 before they are available for public use. It may also be possible that container prices may never return to pre-covid levels.
A1 Worldwide Logistics
With everything that is happening in the global shipping industry, it is more important than ever to be prepared before shipping. If you plan on moving freight and want to be well informed on what to expect, contact us at 305-821-8995. Our experienced freight forwarders are here to guide you through this particular time for shipping and help you move to move your freight to its final destination.
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