Shipping & Freight Cost Increases, Freight Capacity, And Shipping Container Shortage

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.

While some major carriers are adding some badly needed capacity, including on Asia-Europe lanes as well. But some of these services will cater to premium shipments only, and with virtually no spare ships to be found, these additions could come at the expense of capacity on other lanes.

Air cargo rates are also up as importers and exporters seek alternatives to sea freight – despite 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.

Importers and exporters are struggling to secure capacity, get their goods onboard, and get them delivered. With fallout from the recent outbreak at Yantian and ongoing impact from the Suez blockage, these difficulties have been magnified.

Ocean freight rate increases and delays

The Port of Yantian – responsible for about 25% of US-bound, Chinese origin ocean volumes – has been operating at limited capacity for the last few weeks following a coronavirus outbreak. While operations are starting to resume, nearby ports are also congested as they struggle to pick up the slack from Yantian. The slowdown could impact ocean shipping even more than the Suez blockage.

There likely won’t be any significant easing from Asia to the US before peak season starts in July. Retailers are hustling to restock inventory and keep up with demand, but with delays and closures, it’s hard to keep up .

Other importers are placing peak season orders early to avoid being caught without back-to-school and other seasonal inventories.  This ongoing demand translates to freight rates climbing on most lanes, with some carriers introducing early peak surcharges to already elevated prices.

Asia-US West Coast prices decreased 6% to  $6,533/FEU, but rates are still 151% higher than the same time last year.

Asia-US East Coast prices climbed to $10,340/FEU, a 209% increase compared to rates for this week last year.

Asia-North Europe and North Europe-US East Coast rates increased 6% respectively to $11,913/FEU and $5,989/FEU. Asia-North Europe rates are nearly 600% more expensive than it was this time last year.

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High consumer demand and still-lagging inventory levels suggest no let up anytime soon, with additional demand expected from ocean’s annual peak season this month. 

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 May.

While rates came down about 5% over the past week on Asia-US lanes, prices are still up to three times higher than than a typical year.

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.

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

 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.

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. 


Post time: Jul-13-2021

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