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

Last updated: July 29, 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. 

Air cargo rates are stable as importers and exporters seek alternatives to sea freightdespite the expense and possible financial loss – as a way to guarantee inventory and build customer loyalty while their competitors may be sold out due to logistics delays.

Freight Market Explainer 

With everything that’s going on in freight today, Freightos.com CMO Ethan Buchman and Head of Research 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

 

The freight market in July was marked by more disruptions –  including fires in Canada, flooding in Europe, a typhoon in China, and virus outbreaks in Vietnam and elsewhere.

These natural disasters put additional pressure on an already stretched thin industry just as peak shipping season heats up. 

Freight rates continued to climb overall, reaching $10,174/FEU, a 466% increase compared to last July.

High consumer demand for imports pushed transpacific rates up to new record highs:

  • Asia-US West Coast rates reached $18,346/FEU, more than 6x its level a year ago.
  • Asia-US East Coast prices climbed to $19,620/FEU, 487% higher than last July. 
  • Prices from Asia to North Europe spiked 22% since the end of June to $13,706/FEU, more than two and a half times their level at the end of 2020 

Transatlantic rates also increased in July:

  • Europe to North America East Coast prices climbed 6% to $6,013/FEU, triple their level a year ago.
  • Europe to South America East Coast rates spiked 56% to $3,311/FEU, nearly four times their level last year. 

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. And with high consumer demand and still-lagging inventory levels,  prices aren’t going to let up anytime soon.

freight rates

Source: FBX

*A note about our freight rate data:

Please note that following a feedback process with the Freightos Baltic Index’s benchmark administrator, as of 7/28/2021, some outlier data has been excluded in order to more accurately reflect market conditions. This resulted in a significant one-time adjustment that substantially increased rates on China/East Asia-US FBX lanes. Month over month comparisons for the Global and Asia – US benchmarks will therefore resume in our next update. 

More information from the Baltic Exchange, the benchmark administrator, is available here.


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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.

High consumer demand has pushed global air cargo volumes back to pre-COVID levels, with Freightos.com marketplace data showing Asia-US rates climbing about 25% to most destinations in April and remaining elevated through the summer.

While rates remained stable on Asia-US lanes, prices are still double than a typical year. However, air cargo is “only” about six times more expensive than ocean freight, compared with a normal spread of about twelve times. Even at these rates, though, some shippers desperate for inventory are shifting from ocean to air, an indication of how strained the industry is at the moment.

Expectations are that air cargo peak season, normally in October and November, could start in September with importers rushing to make sure that holiday inventories arrive in time.

In addition, COVID-19 outbreaks prompted officials at some origins to impose regional lockdowns. This is impacting factory output and volumes flowing to airports. These tight conditions are likely to keep rates elevated for some time.

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.

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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