Freight Fright: Shipping Costs Keep Rising

By Alan Wolf, YSN

COVID-related woes continue on the high seas, where it’s taking more time and money than ever to ship a container to America.

According to a report in shipping publication FreightWaves, Asia-to-U.S. West Coast rates including surcharges currently stand at $18,345, six times higher than a year ago, and the price for shipping to the U.S. East Coast has quadrupled to $19,620 per forty-foot equivalent unit, based on the Freightos Baltic Daily Index.

The main culprit, FreightWaves said, is unprecedented consumer spending in North America, which has increased import levels by 10 percent in the first half of 2021 compared to 2019. Other culprits include COVID outbreaks and lockdowns at factories and ports; wildfires that are disrupting rail lines serving the Port of Vancouver; and Typhoon In-fa, which is causing shipping delays in China.

But regardless of the cause, the massive backlog of imports has also impacted air transport, trucking, rail, and warehousing, overwhelming capacity in many commercial centers. Indeed, FreightWaves reported that the time it takes for a box to get from a vessel onto a train at the docks is 18 days in Seattle, two weeks in Oakland, and more than a week at the Port of Savannah, according to the latest data from Sea-Intelligence. And transit times from Shanghai to Chicago via the port of Los Angeles/Long Beach, including cargo staging and the vessel voyage, have more than doubled to 73 days from 35 days, noted Sanne Manders, COO for Flexport, a San Francisco-based freight forwarder.

That means it takes 146 days for a container to circulate back to the point of origin for reloading, effectively reducing container capacity by 50 percent, FreightWaves said.

For some, soaring transportation costs are more than can be absorbed. Importers of low-value commodities, such as wooden assembled furniture, who built their business models around $1,400 shipping rates, are losing money under current market conditions and have essentially been priced out of the market, according to FreightWaves sources.

The numbers are prohibitive for appliances as well. According to Akhil Nair, a carrier management and ocean strategy VP at SEKO Logistics, an average 40-foot container holds about 300 refrigerators. Prior to the pandemic, the transportation cost per unit averaged roughly $12 to $16; today it’s closer to $70. “That’s a significant percentage of the retail price when you can buy [a refrigerator] for $300,” he told FreightWaves. “There will be some room to raise the prices to the consumer, but if that happens across the board, across all segments, I think that’s where [demand could eventually fall].

When will the craziness end? Short of an economic or consumer slowdown, the consensus among logistics executives is that the transportation crunch won’t ease before the Chinese Lunar New Year next February, FreightWaves said.

As Robert Khachatryan, founder of Freight Right Global Logistics explained, the Port of Los Angeles is already operating at about 160 percent capacity, so even adding extra ships won’t help. “The demand needs to go down by 60 percent to 70 percent for us to see a real improvement,” he said on a recent Freightos podcast.

His best advice: Get your orders in extra early. “As of May we were shipping Christmas products already,” Khachatryan said. “We have people trying to get their product to the U.S. whenever there is space available. They’re not going to wait until September.”

Specifically, retailers that need product on the sales floor by Nov. 1 should make sure it gets on a vessel by Aug. 21 for East Coast destinations and by Sept. 3 for Western locations, SEKO Logistics urges.

See the complete report at FreightWaves/American Shipper.