How Coronavirus is Impacting Freight & Potential Shipping Delays
Non-stop demand for ocean freight from Asia to the US continues to overwhelm major US ports, keeping ships waiting outside several major West Coast ports and driving air cargo rates up as importers seek alternatives.
Though the Ever Given was cleared before the end of March, the effects at Europe’s ports and the resulting increase in rates were only felt in mid-April when the surge of delayed and scheduled ships arrived all at once. This has led to delays, backlogs and a worsening empty container shortage at Asian origin ports.
While the huge ship was liberated, global trade is beginning to feel the hit on both capacity and pricing. It will likely take months to recover completely.
Finally, with retailers still struggling to keep inventory levels up and already looking to get a leg up on peak season, there may be no relief from high costs, long delays, and equipment shortages.
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Ocean freight rate increases and delays
Asia to both US East and West coasts are still experiencing very high volumes and port congestion, pushing factory-to-door delivery times to an average nine weeks compared to four to five.
Though Asia-US West Coast rates haven’t climbed this week, congestion is still a problem with more than 20 ships now waiting outside Long Beach and Oakland ports.
There likely won’t be any significant easing of demand from Asia to the US before peak season starts in July as retailers hustle to restock inventory and keep up with strong sales. Other importers are placing peak season orders early to avoid being caught without back-to-school and other seasonal inventories.
In Suez news, releasing the Ever Given may have opened up the lane to other carrier vessels, but the damage was already done.
A month post the blockage, global trade is beginning to feel the hit on both capacity and pricing. Some carriers are warning that critical congestion at major ports will result in delays, equipment shortages, and cancelled sailings.
Plus, freight rates continue to rise on some lanes.
Asia-North Europe freight rates were decreasing slowly the last few weeks, but the impact of the Suez blockage pushed prices up 4% compared to last month to $7,730/FEU.
Asia-Mediterranean prices likewise increased 7% to $8,053/FEU, just below their January high.
Backhaul rates from Europe to Asia remained largely unchanged as carriers focus on returning empty containers.
Europe-North America rates spiked 57% this April to $3,428/FEU, an 83% increase since the start of the year.
Asia-US East Coast rates increased 7% to $6,203/FEU, after reaching a new high mid-month, also a result of still-surging demand and some reduced capacity from Suez delays.
Transpacific Asia-US West Coast rates fell 6% to $4,854/FEU, still triple last year’s level. Though port congestion and delays have improved compared to the start of the year, this continues to be a problem.
High consumer demand and still-lagging inventory levels suggest no let up is coming anytime soon, with additional demand expected from ocean’s annual peak season in July not far off.
Air freight delays and cost increases
Expensive and unreliable ocean freight is pushing shippers to air cargo. Healthy demand has pushed global air cargo volumes back to pre-COVID levels with Freightos.com marketplace data showing Asia-US rates have climbed about 25% to most destinations so far this month.
Rising fuel costs are also putting additional pressure on prices, pushing carriers to raise rates. Shipments including new electronics releases and rapid COVID testing kits are likewise pushing air cargo rates up.
These conditions are likely to keep rates elevated for some time.
Trucking delays and cost increases
Trucking volumes, rates, and employment have been climbing since the summer, rebounding rapidly from an early pandemic slump.
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.
Amazon shipping in 2021
With a 60% annual increase in sales by third party sellers on Amazon’s marketplace last year, the boom in e-commerce continues in 2021.
Keeping up with door to door pricing for Amazon FBA shipping can be a hassle.
Want to know what the rates are? Check out Freightos.com’s FBAX, the Amazon FBA freight index
With data from thousands of weekly pricing points from freight forwarders, we’ve developed a weekly index of freight prices including for Less than Container Load (LCL), Full Container Load (FCL), and air cargo, from major export cities in southeast Asia to the most popular Amazon fulfillment centers in the US.
Read up on how Amazon sellers can deal with rapidly-changing consumer demands as well as inventory challenges HERE.
When will freight rates and shipping prices go down?
In the current situation, many importers are wondering when they can expect freight rates and shipping prices to go down. 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.
- Book now if you can. Freightos.com is fully operational, so book orders now to get goods moving as quickly as possible.
- Ship closer to your goods’ ready date to avoid rate changes. With the current shipping climate, booking too far in advance may mean rates change before your goods are ready.
- 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.
How to stay informed:
- Keep up to date on the industry with our resource roundup page.
- Check out our daily FBX ocean rates index to help you stay on top of freight rates in 2021.
As always, we at Freightos.com are here to help. Please reach out if you have any questions or concerns.