Whether you are a business or just a regular person trying to shop online, you most likely noticed a few trends that started since the pandemic. But the one that feels the most problematic is the fact that freight costs have significantly increased over the past 2 years, to the point where shipping something to another country or even within the country has become increasingly expensive.
In fact, international shipping rates are at an all-time high, to the point where it will cost you even a few times more than the pre-pandemic rates to ship an item. Even if you want to ship something from Asia to the US, the contract rates are up to $3000 for a container of roughly 40 feet, and this is up to 50% higher than a year ago.
The main problem that brought higher freight costs is definitely the supply chain issue. Due to the pandemic, many supply chains were affected in a variety of ways. Some of them had to slow down due to manufacturers not being able to produce the necessary amount of items. As a result, there are shipping delays, and those add to the overall shipping costs.
Then there’s also the fact that supply chains are trying to reorganise due to the pandemic. Social distancing and different work requirements have limited the number of raw materials that can be harnessed and produced, to the point where it can be incredibly problematic to access the necessary freight costs and tackle everything in an appropriate and professional manner.
As we all know, the market always sets the rate. If there’s a lot of demand, yet limited supply, you will end up with a shortage and higher costs. That’s why ocean carriers and freight professionals are raising their prices. There’s a high demand for shipping items all over the world, but the freight personnel is limited, and that alone leads to higher shipping costs.
On top of that, the freight costs are higher because there are covid-related restrictions to the point where it can be very difficult to ensure a certain shipping date. There are way more stops, and multiple check-ups that freight companies need to do, and these prolong shipping times. We can also add to that the fact that many freight businesses end up with their ships waiting in ports for many days just to get processed. It becomes a true challenge and all these things add up to shipping delays, among others.
Due to the pandemic, we had a lot of countries locking up either the entire country or a part of it, and that ended up bringing shipping problems. On top of that, shipping companies cut the capacity of major routes. As we are slowly stepping out of the pandemic, global demand is recovering, but the freight capacity still stays limited.
Because of that, there’s a huge demand for shipping items and with a limited capacity, freight companies have no other choice but to raise prices. This helps cover the total costs, while still adapting to the requirements that need to be tackled at this particular time. It’s one of those things that have the potential to bring in very good results in the long run.
Since many supply chains are not working at the capacity many would expect, it can be extremely difficult to maintain the same prices, despite the heavy demand. As we mentioned above, the market usually dictates prices, and when there are fewer shipping options when compared to the high demand, it’s very common to see these price increases. It’s a problem that will be surpassed eventually as more shipping options are allowed to operate at their full potential.
Yes, due to the pandemic, some shipping options either don’t work at all, or they end up working at a limited capacity. Companies that need products shipped right away are willing to pay a higher price, just to ensure that their freight reaches the destination as quickly as possible. On top of that, some shipping companies are also speculators. They are focused on getting the best ROI that they can, since there are many businesses that need this type of service and barely have any alternative.
Yes, as we mentioned earlier, it can be very difficult to find an alternative to ocean freight. Sure, you can use truck-based transportation when possible, but this is not exactly feasible in every situation. And that’s where the main problem stems at this time. There are way too many businesses that rely solely on ocean freight, especially when they buy a lot of items from Asian countries or just overseas in general.
Shipping via train or air is either not possible, or it’s extremely expensive to the point where it’s more affordable to opt for ocean freight. All these tiny things add up and show that yes, prices can skyrocket to the point where they are extremely high and hard to handle. Also, it’s important to note that freight companies shipping lower-value items actually increased their freight costs from 5% to around 20% or even more in some cases. Yes, the type of item being shipped also matters, and it shows the true situation and how every simple thing can add up to increase freight costs in the long run.
Another reason why we think freight costs are very high is that 2021 wasn’t exactly an even year when it came to freight recovery. Many countries exported more than the previous year, but the freight capacity was limited. Because of that, in some cases, you had countries that were able to resume exporting and importing with ease, while many others found it extremely difficult to deal with this type of problem.
This unbalanced recovery is certainly a problem when it comes to world trade. While freight rates will balance once the Ukraine war and pandemic phase out, this short-term pressure is set to keep freight rates at a high value. It might take some time until they balance out, so we can expect these higher rates to continue, at least throughout 2022, maybe even more than that.
Due to the pandemic, Chin had their shipping containers stuck in other regions. That ended up being a problem, and even now the shipping container manufacturers in China are producing only a supply that covers maybe 2-3 weeks of demand. So they aren’t ahead by a whole lot, which ends up being extremely challenging at this particular time. There are still many demanding situations that keep production at a very slow rate, and that has a significant impact on the shipping process. Without enough shipping containers, it becomes more and more difficult to ship items. As a result, we can easily see why all these costs are getting higher and higher.
Another thing that adds to the shipping costs is that container prices are higher when compared to the pre-pandemic times. In early 2020 the CEU price for a new container was $1800, in late 2020 the CEU price was $2500 and now it’s up to $3500 per unit, sometimes even a bit more than that. Needless to say, all these high costs end up being problematic, to the point where they have a negative influence on freight prices, to say the least.
Congestion is one of the issues that bring in such a major problem and an increase in freight costs. Many vessels end up blocked in ports, and thus other shipments get delayed because they are not coming back at the right time. All these things are a part of the problem because, without the right amount of ships and containers, many businesses end up waiting a very long time until their stuff gets shipped to the destination.
This is where many speculators come into play because they end up asking a large amount of money to basically prioritize certain loads. That can be a huge problem since others get left behind unless they are forced to pay a significant amount. It’s definitely an issue to deal with, and one that certainly becomes a problem.
We also need to take into consideration the problems related to the Ukraine war and pandemic in regard to fuel production and prices. These events had a negative impact on fuel prices, to the point where now we are paying a whole lot more when compared to 2 years ago for the same amount of fuel. Needless to say, freight companies see the worst end of this situation, because they are forced to purchase fuel very often, and their costs increased quite a bit.
This is yet another reason why you can expect freight costs to rise since whenever the fuel costs are high, freight costs will increase as well. It will take some time to get things back on track, but as long as fuel costs are high, we can’t possibly expect lower freight costs. If anything, they will get higher and higher if the fuel costs maintain an upward trajectory.
Due to the pandemic, some port workers decided to shift their careers, because they felt underpaid, among other reasons. The problem many ports are facing is that there’s a scarcity of laborers and they have less manpower than they need. That’s why many ships end up sitting in ports way more than they normally would. It’s a situation that ends up increasing the cargo unloading costs. This is yet another thing that adds up to freight costs. As a result, we can easily understand why these costs are higher and higher, and that alone is definitely one of the things to take into consideration in a situation like this.
Carriers and ports are pretty much forced to increase wages in order to retain workers, but also attract new ones. Like all the other costs, they tally up and the companies shipping products end up with a higher freight cost. Of course, as a business, you end up covering those expenses from customers. That’s the main reason why many products are more expensive at this time because supply chains affected the shipping process, and any problems like these end up affecting the end-user as well.
It can be tricky to try and ship items to new locations at a higher cost. In the end, it affects the bottom line, and customers won’t really like paying more than they normally do. That being said, some businesses already started doing different things to avoid those extra costs. Some of them shifted manufacturing locations to rely less on freight transportation, and instead they focus more on trucks and land-based shipping to cut costs.
In some cases, there were also businesses that started relying solely or mostly on air freight. While it’s not ideal and even expensive in some cases, air freight became the ultimate solution for some businesses that needed to continue shipping their items. In their case, not shipping items would lead to major losses, so they decided to take the smaller loss, which is a more expensive freight option.
Even if the freight costs skyrocketed in the past few years, there are still ways to cut down on shipping costs. Working with professional businesses that have a lot of shipping options and solutions is the ideal approach here. Transport Masters USA is here to offer you direct access to the best and most comprehensive freight solutions on the market. Transport Masters is ready to help you ship all the items you need, both quickly and safely. On top of that, you know the exact costs too, everything is transparent and you don’t need to worry about hidden costs. Make the most out of this great opportunity and ship your items right away with Transport Masters USA if you want fast, reliable, and efficient freight services!
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