“5 reasons why global shipping rates keep rising!
Shipping costs have been rising steadily since the fall of 2020. The first few months of 2021 have seen a surge in freight rates on many major trade lanes, with prices on some trade lanes tripling from last year. Costs look set to continue rising for a number of reasons.
Here are five reasons why shipping costs won’t drop anytime soon:
1. Persistent global imbalances push prices further
Issues that have accumulated since the COVID-19 pandemic include imbalances in the production and demand of goods, different lockdowns and opening times across countries, as well as shipping lines reducing capacity on major routes and shortages of empty containers. As the economic recovery progresses, global demand is recovering strongly, especially in areas most closely related to international trade in goods. With the further opening of the economy and the restructuring of inventories in multiple links of the supply chain, the competition for shipping capacity has intensified.
2. Lack of Alternatives
How many shipping alternatives do you know? Unfortunately, there are only a few options other than sea freight. Before you choose to ship by train or air, you should consider product value, as well as limited capacity and high tariffs. One option for transporting high-value products is by train or air. What you need to check before hiring an air freight forwarder in Kuwait is what you need to pay. Is this shipping method cost-effective for your business? It mostly depends on the value of your product. The situation is different for low-value products such as household items, toys, clothes or promotional items. Unfortunately, they found that shipping increased from around 5% of the purchase cost to more than 20%.
3. An uneven recovery throughout 2021
Trade in goods will grow further, and not only major trading countries but also their trading partners will continue to recover. As competition for capacity will continue, the uneven recovery will continue to exacerbate some of the problems in world trade, including the diversion of empty containers. All of this adds to the pressure on freight in the short term.
4. Port congestion and closures
Another reason global shipping costs will continue to rise has to do with port congestion and closures. Congestion is a huge problem, as the link between cancelled sailings and delays shows. Unfortunately, the rate of ship compliance with schedules has declined. Even late ships are accompanied by increased delays. There are signs that recovery and average performance will start to improve. Average delays have improved as the percentage of ships arriving at their destinations on time stopped the slide in April 2021. When it comes to lower ship on-time rates and an increase in the average delay rate for late ships, some performances are starting to pick up. Shipping performance in 2021 continued where 2020 was disrupted. Still, overall performance was the lowest it’s been in a decade.
5. Reduce blank sailings
While global capacity on major routes has generally returned to pre-lockdown levels, airfreight continued to reduce scheduled capacity by 10% in the first quarter of 2021. Part of the cancellation is due to delays, so continued congestion within the system could cause shipping to reduce capacity for a short period of time.”
