Shipping rate of containers has skyrocketed and the shipping sector sees no relief before 2022

Summary: 

Prices to ship containers from Asia to the U.S. And Europe have gone high due to the disruptions across the supply chain that triggered bottleneck inland distribution and delays. The executives in the shipping industry expect this situation to remain for the rest of the year.

Content: 

According to a global pricing index by London-based Drewry Shipping Consultants, the average price to ship a 40-Foot container has increased more than four times than it was last year. In fact, the measure is rushing to 53.5% since 1st week of May.

There are several reasons for the price hike in this sector. The cargo owners bid up the price so that the containers can be adjusted to the ocean transportation capacity.

To cope with the situation, the companies might have to pay higher than the listed pricing for the last-minute’s agreements. By Drewry’s measure, the listed pricing to ship to the major ports of Europe and U.S West Coasts are closer to $12,000 per container whereas, for the last minute’s agreements, companies are being charged for $20,000 which is straight $8,000 dollars more to get good onto outbound vessels.

The shipping experts say the bottleneck situation occurs as Western retailers and manufacturers rush to top up their accounts with the goods that were diminished due to the Covid-19 pandemic. The rates actually started going upward last summer after the lockdown ended and the consumer demand began rising.

The price rising reason also includes the Suez Canal Blockage in March which caused the bottlenecks at gateways in Southern California and China’s Yantian Port. The post had tied up ships at sea for days and weeks at a time leaving the containers in short supply. Sea-Intelligence Apps, a Denmark-based shipping research group said 695 ships were more than a week late in arrival at U.S. West Coast Port in the first five months of 2021.

Brain Bourke, Chief Growth Officer at Seko Logistics, who is also an Ill-based freight forwarder said that “If you want to get a reservation, you need to plan it out two months in advance. Everyone’s trying to grab any spot they can and they’re all spoken for.”

Moreover, according to the statement made by Zhu Guojin, a consultant at the logistic firm Jizhi Chain Service Yiuw Co, the company’s clients including Amazon.com Inc vendors and some American importers are so desperate for the goods that they do not seem to be caring for prices anymore. Although, last year, many clients delayed the shipments in the hope that the price might go down.

Philip Damas, head of the Supply Chain Advisors at Drewry, expressed his anxiety regarding the persistent bottleneck situation. According to his observation, the productivity of the containers is deteriorating as containers are sitting on the water and waiting at ports for a much longer time. Every failure is creating a rippling effect and causing a jam in the supply chain sector and in return, more demand for the containers is increasing. This is truly a vicious cycle. As everyone is spending much longer on round trips.

He also anticipated that the situation might remain critical until the Lunar New Year in early 2022 as the Chinese factories normally shut down at that time. He also mentioned that there is no hope that in this peak season the backlogs and delays might get improved against the extreme demand from the Western countries.

On the other hand, Mr. Bourke of Seko said, “It’s been peak season all year and we are planning for it to be a flat-out peak season until the first of the year.”

Pic and Article source: https://www.wsj.com/articles/container-ship-prices-skyrocket-as-rush-to-move-goods-picks-up-11625482800?mod=djemlogistics_h

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