Container shortages and increasing freight rates have become a global challenge during the COVID-19 pandemic. It has caused disruptions and challenges to supply chains across all industries. Over the last six to eight months, freight prices have skyrocketed and become the most expensive we’ve seen in years. This has impacted almost all importers.

The below table shows the gradual increase in freight costs over the last 12 months.

 

Freightos Baltic Index (FBX): Global Container Freight Index

The reasons behind the absurd rise in freight prices globally has come from a number of factors.

 

The COVID-19 pandemic

The shipping industry was one of the worst-hit sectors during the Covid-19 pandemic, mainly due to major oil-producing nations having to cut down on production drastically in order to meet the Covid safe plans introduced during the pandemic. This created a demand-supply imbalance which resulted in the pricing pressures. Crude oil prices were hovering around US $35 per barrel and have recently increased to more than US $55 per barrel.

Another contributing factor is the shortage of available empty containers. Production was halted in the first half of 2020 and companies had to step up manufacturing to meet the increased demands. With the aviation industry also been affected due to cancelled flights, extra pressure was added to ocean freight for the delivery of goods that would have originally been air freighted. This has caused a knock-on effect on the turnaround time of containers.

 

Shipment Imports from China

The demand for containers in China has also contributed to the freight price increase. As China is the largest manufacturer in the world and roughly 90% of Australian imported products come from China, the lack of available containers results with countries currently paying double or triple the price to procure goods from China in order to fulfil their orders.

 

Continued reliance on split shipments

Ecommerce retailers often use split shipments in order to collect goods from multiple warehouse locations or ship to different locations for easier distribution. As the amount of shipments required increase, so does the freight prices.

 

What can be done to counter the rising freight costs?

Advanced planning and having an understanding of what the various costs relate to is the most effective way to secure the most competitive freight prices. At Saving Point we have developed a system to assist importers providing them with a detailed understanding of their freight costs.

Just like any other industry, we’ve had to adapt in order to assist our clients and enable them to receive the best rates they can given the current market.

 

If you’d like more information on how Saving Point can assist with your International Freight costs, please email us on [email protected]

 

 

 

 

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