Coronavirus & Shipping: Air and Ocean Freight Delays, Rates & Cost Increases

Last updated: February 24, 2021 


How Coronavirus is Impacting Freight & Potential Shipping Delays

Non-stop demand for ocean freight from Asia to the US continued to overwhelm major US ports this week, keeping ships waiting outside several major West Coast ports and driving air cargo rates. 

The continued peak conditions and congestion have some US retailers worried that Easter-related goods won’t arrive in time and carriers are reporting fully booked ships through the end of the month.

With retailers still struggling to keep inventory levels up, there may be no relief from high costs, long delays, and equipment shortages until Q2.

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Ocean freight rate increases and delays

Asia to both US East and West coasts are still experiencing very high volumes and port congestion, pushing factory-to-door delivery times to an average nine weeks compared to four to five.  

According to port authorities, currently it would take a month to clear just the tens of ships already anchored and waiting in the bay. 

Plus, this non-stop demand is also pushing ocean rates to the US up at a time when they would normally level off and begin to decrease in the weeks after Chinese New Year (see chart below). 

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Freight rates February 2021

 

China-US rates to West Coast ports reached $4,922/FEU this week, a 259% increase compared to last year, while China-US East Coast are up 119% year over year at $5,822/FEU.

With delays and disruptions, the actual cost of shipping is thousands more in premiums and surcharges.

Air freight delays and cost increases

The high cost and uncertainty in ocean freight is driving more importers to air cargo, squeezing capacity and driving up prices. Plus, with many factories in China staying open over the Lunar New Year holiday to meet consumer demand, air cargo prices resisted their usual seasonal dip.

With space 20% lower than this time last year, rates from China to US increased 50% since January.

Trucking delays and cost increases

Trucking volumes, rates, and employment have been climbing since the summer, rebounding rapidly from an early pandemic slump

With high demand from consumers, importers are rushing to replenish inventory, causing capacity in trucking to tighten and driving rates up even over the Chinese New Year.

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.

This will likely remain the case through the first quarter of 2021.   

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 in 2021.

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.

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When will freight rates and shipping prices go down?

In the current situation, many importers are wondering when they can expect freight rates and shipping prices to go down. 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. 
  • Ship closer to your goods’ ready date to avoid rate changes. With the current shipping climate, booking too far in advance may mean rates change before your goods are ready. 
  • 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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