Many businesses and sectors globally are contending with dramatically rising transportation costs. As predicted, ocean freight expenses are climbing higher in 2021.
It’s only September, but many importers from the United States are importing at peak season volumes earlier than before. They want to ensure holiday goods arrive on time.
New Highs in 2021
Long Beach and LA ports are experiencing the worst congestion ever. A record number of vessels joined by an increasing number of arriving ships are waiting off the coast. Why?
Ocean carriers have increased transpacific container capacity by around 22% as they rush to meet the rising demand. However, with no solution to the shrinking port capacity, those extra ships have resulted to more than 40 ships waiting outside LA and Long Beach ports for days, sometimes weeks.
Increased Costs in All Trade Routes
In the last 12 months, all trade routes have witnessed increasing ocean freight rates because of the pandemic-induced effects. August 2021 saw the freight rate hitting $10,174/FEU, 466% more than last year. Freightos Baltic Index (FBX) also reports that container vessels’ charter prices have gone fourfold more than in August 2020.
As of August 2021, FBX Freightos data revealed that transpacific rates continued to post new record levels on most trade lanes:
Two peak seasons are also fuelling the rising ocean shipping costs. International freight experiences two busiest periods (peak seasons).
The first peak season usually starts in mid-August and ends in mid-October as the peak holiday season approaches. The second one often comes in January or February, when some Asian countries observe the Lunar New Year.
These two periods usually spur strong global demand, leading to insufficient container capacity. That’s why importers and exporters need to brace themselves for even higher levels of ocean freight costs.
Lockdowns in Asia Will also Fuel Costs
Furthermore, some Asian countries and regions are currently under local lockdowns because of the COVID-19 pandemic. This will probably bring about disruptive effects on maritime shipping and push the rates higher in the fourth quarter of 2021.
Freight is dramatically increasing in costs with little sign of slowing down in the short term. But also faced with the dwindling capacity, many exporters and importers are willing to pay extra just to ensure their goods don’t stop moving.
Tim Shelton is a senior partner with machete.systems with E Juma – Staff Researcher