Soaring freight costs and transit delays from China threaten price rises for consumer goods and products

As consumer demand for Asian-made goods rebounded in the second half of 2020, the shipping lines decision to remove capacity by idling vessels and stop replenishing container supplies, had an almost instant impact on freight rates with the unbalanced sea freight supply and demand equation driving rates up.

Competition among shippers for empty containers has had freight rates soaring since the final quarter of 2020, with the cost of shipping goods from China to Europe hitting record highs, even as thousands of empty containers remain stranded in the UK, Europe and United States.

In the first half of 2020, as first China and then the West locked down to try and curb COVID transmission, the shipping lines cancelled over 30% of planned sailings in response to the slowdown in global trade, but within just a few months shipper demand was generating higher cargo volumes than origin and destination ports, hindered by COVID-safe operating procedures, could efficiently handle.

Congestion at Felixstowe and ports across the world continues to hinder the efficient working of docked vessels and interrupting the return of empty containers, with shipping lines imposing surcharges to offset the additional costs.

Shippers have seen significant increases in shipping costs since the start of 2020 and in some cases that increase will be greater than anticipated margins, leading some to pass these costs on to consumers.

For many importers, delivery times in December reached the worst levels since the first lockdowns last April, and delays in transportation and general goods shortages are growing, further exacerbated by issues surrounding the end of the Brexit transition.

The BBC illustrated the reality of the situation yesterday, in an interview with the importer of large toys such as swings, trampolines and climbing frames, that have been hugely popular during the lockdowns.

Despite their popularity, high transport costs could see prices soar by 40-50%, as port congestion continues and vessel space out of China is limited, even if an empty container can be located for loading at the factory.

Even though ocean freight rates may currently outweigh the cost of some items, demand for Chinese goods continues to rise, placing ever more strain on already limited shipping capacity and driving prices up further.

Not only has the cost of sea freight increased, UK haulage has also risen as the sector continues to struggle to meet sustained demand, with COVID-diminished resources, capability and workforce.

Short-term hopes lie with the slowdown in Asian manufacturing that typically accompanies the Chinese New Year in February and the carriers decision to maintain most of their capacity, which may them the respite and vessel space to clear backlogs of containers and lead to a temporary cooling of prices.

In what looks likely to be another tumultuous year, Metro is well placed to deliver reliability and cost effective solutions based on a fixed validity pricing structure.

Protect your supply chain and budgets for 2021, by providing us with your forecasts and we will secure you a deal for the year ahead, that has fixed validity and consistency in pricing.

Call Ian Barnes and/ or Grant Liddell to discuss the latest market situation and your plans for the year.