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Why are shipping rates so high right now?

Updated: Apr 2, 2021

On the surface, shipping rates are high due to a massive supply chain disruption in conjunction with a boost in consumer purchasing of goods and services. As we look deeper into the issue, we see there is a lot more to the story. In this article we will dig below the surface to uncover the details behind the shipping rate surge.

Previous Costs Compared to Now

In past years, shipping a 40 ft container from China to Europe or the US west coast would cost roughly $800 to $2,500 USD (1CBM = $35 to $70 USD), generally taking 32 to 40 days to Europe and 10 – 14 days to US west coast. However, by the end of 2020, rates for ocean freight shipping have not only seen nearly a 200% increase, but the time of delivery has also increased. For example, according to Freightos Baltic Index, the current FBX East Asia to North America West Coast container price is around $5,000, though some shippers are paying a few hundred or thousands more to bid on the space availability.

Bottlenecks in The Supply Chain

Looking back to early 2020 when China’s manufacturing and shipping froze due to COVID-19, we can first see where the supply chain became disrupted. With countless businesses worldwide depending on goods from China, without shipments, vital inventory began to dwindle. Then, just as China reopened, consumers all over the world were forced into lockdowns, spurring an increase in online shopping.

An article from the Wall Street Journal explains, “online sales also grew significantly, rising 76% in the U.S. on Tuesday compared with the first day of Prime Day in 2019, according to Digital Commerce 360 and Inc. Retailers this year have seen a huge uptick in consumer spending online as millions of Americans stayed home for work and school and avoided in-person shopping due to the coronavirus pandemic.”

As China elevated the manufacturing of “in-demand” products, the issue quickly became, not having the goods, but having enough equipment to ship the atypical influx. From loading tools to containers, there is a worldwide shortage. Today and forecasted for the rest of 2021, the sudden increase in physical goods combined with already backlogged shipments, congested ports, and a lack of equipment has created a surge in shipping rate prices.

Managing the ongoing unpredictable conditions including delays and high costs comes down to understanding the current import/export market. As an international logistics expert, ClearFreight provides its customers with impeccable service and in-depth knowledge of the market, allowing them to focus on their business. For information on how ClearFreight can support your supply chain, contact us today.

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