Shipping & Freight Cost Increases, Freight Capacity, and Shipping Container Shortage [2021]

Last updated: September 5, 2021

Freight & Shipping Delays

With ongoing pandemic-related delays and closures, non-stop demand for ocean freight from Asia to the US, and a lack of capacity, ocean rates are still very elevated and transit times volatile. 

Freight Market Explainer 

With everything that’s going on in freight today, Freightos.com CMO Ethan Buchman and Research Lead Judah Levine got together to summarize what’s happening, why it’s happening, and what importers and exporters can expect in the coming months.

Check out the full video below:

Ocean freight rate increases and delays

 

With many importers and exporters already shipping holiday inventory, August is likely set a new record for monthly US ocean import volumes. 

In response to rising demand, ocean carriers have increased transpacific container capacity by approximately 22%. But with no way to increase port capacity, those additional ships are contributing to the new record number of vessels waiting for days outside of LA/Long Beach ports.  

Ocean freight rates remain extremely high but stable.

  • Asia – US prices went unchanged this week, but are still 5X their level a year ago.
  • Asia – US East Coast rates are still more than $20K/FEU
  • Asia – Europe rates are at record levels – 8X this time last year – but have also remained stable.
Containerized Freight Rates from the Freightos Baltic Index
Lane Global Asia-US West Coast Asia-US East Coast Asia-North Europe North Europe-US East Coast
This Week $10,321 $18,425 $20,057 $13,855 $5,929
Last Week 0% 0% 0% 0% 0%
Last Year* 430% 452% 415% 714% 238%
* Compared to the corresponding week in 2020

 

Basically, freight is really expensive, but with close to no capacity many importers and exporters are willing to pay premiums in addition to these rates just to keep their goods moving. 

 

Source: FBX


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Air freight delays and cost increases

Expensive and unreliable ocean freight is pushing shippers to air cargo, but this demand is impacting pricing and increasing the landed cost of goods.

China’s zero tolerance approach to COVID outbreaks is also disrupting the air cargo market. Travel restrictions and quarantine requirements for ground and air crews have resulted in hundreds of cancelled flights or planes leaving half loaded or empty.  

New rail disruptions in the US also have many importers considering air cargo as an alternative. Though operations are improving at Shanghai’s Pudong airport, COVID-related disruptions are having a big impact on air cargo capacity and rates.

Air cargo from China to the US is now four times higher than pre-pandemic levels. Ground handling at many US air cargo hubs are overwhelmed as well, with shipments arriving at Chicago’s O’Hare airport still stuck for days.

Trucking delays and cost increases

With high demand from consumers, importers are rushing to replenish inventory, causing capacity in trucking to tighten and driving rates up.

Now many observers warn that quarantine rules for returning truckers could cause significant delays even if goods manufactured over the holiday are ready to ship.

Freight congestion extends well beyond ship backlogs and into rail and trucking as well, with Freightos.com data showing that average door-to-door ocean transit times in August were at record highs – 15% longer than in May, and 46% longer than a year ago.

Amazon shipping in 2021

With a 60% annual increase in sales by third party sellers on Amazon’s marketplace last year, the boom in e-commerce continues.

Keeping up with door to door pricing for Amazon FBA shipping can be a hassle.

Want to know what the rates are? Check out Freightos.com’s FBAX, the Amazon FBA freight index

With data from thousands of weekly pricing points from freight forwarders, we’ve developed a weekly index of freight prices including for Less than Container Load (LCL), Full Container Load (FCL), and air cargo, from major export cities in southeast Asia to the most popular Amazon fulfillment centers in the US.

Read up on how Amazon sellers can deal with rapidly-changing consumer demands as well as inventory challenges HERE.

When will freight rates and shipping prices go down?

In the current situation, many importers and exporters are wondering when they can expect freight rates and shipping prices to go down. The answer? Not yet.

But, despite potential delays and high freight shipping costs, there are a few steps importers can take right now:

How to navigate the current freight market:

  • Compare at least a few quotes and modes to make sure you are getting the best cost and most efficient service possible.
  • Buffer your freight budget and transit time for changes. Costs due to unforeseen delays or limited capacity can arise, so be prepared.
  • Explore warehousing options to mitigate the effects of lowered demand and business restrictions in the US.
  • Pay attention to the profitability of your goods and consider if a pivot could be worthwhile. Additionally, remember to factor in freight costs when assessing profitability. 

How small or midsize importers can plan for operational success on Freightos.com:

  • Understand that delays and extra charges may arise. Freight forwarders are trying their best to move goods on schedule without additional fees, but in this unstable period, delays and additional charges can occur out of forwarders’ control. 
  • Consider which shipping mode is best for you right now. As during non-pandemic times, ocean freight is typically far cheaper but has significant lead time. If your transit time demands it, ship by air and you’ll have confidence in the transit times. 
  • Book now if you can. Freightos.com is fully operational, so book orders now to get goods moving as quickly as possible. 
  • Communicate regularly with your freight forwarder. This is more important than ever – staying in touch means you’ll have a better handle on your transit time and stay on top of any changes that may arise. 
  • Make sure that you have manpower to accept your goods at arrival. This will minimize delays. 

How to stay informed: 

As always, we at Freightos.com are here to help. Please reach out if you have any questions or concerns.

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