Have you tried placing a shipping order to restock your inventory for the last few months? If you did, you probably had a heart attack when you saw how much it would cost. International shipping rates are at all-time highs due to shortage cause by post-pandamics. Along the China-EU shipping lane, TIME reports: “Transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam now costs a record $14,000, a whopping 547% higher than the seasonal average over the last five years. At the beginning of 2020, it cost around $2,000 to ship container from China to Europe. ” Between Asia and North America, Bloomberg reports that “contract rates…are coming in around $2,500 to $3,000 for a 40-foot container—25% to 50% higher than a year ago…” And between China and the UK, the cost of shipping has gone up by over 350% in the past year.
The question remains: why is shipping so expensive in 2022? The primary reason for the sudden spike in the price of shipping is the world’s ongoing nemesis: COVID-19. The pandemic affected global supply chains in 2020, and shipping prices reflect that. With prices estimated to remain at these levels until 2023, both ecommerce businesses and other small businesses should consider diversifying their fulfillment options to get data-driven insight into container shipping costs in +60 strategic locations worldwide to get a better container price in the near term.
In this blog, we’ll break down the key factors that led to the current rise in shipping prices and ways in which businesses can mitigate their shipping costs.
Jump to the section of the article that you find most interesting:
- There’s a Global Shipping Container Shortage
- The Suez Canal Accident Had a Significant Impact
- How Can Companies Mitigate Their Shipping Costs?
There’s a Global Shipping Container Shortage
After the world went into global lockdown in response to COVID-19, China reopened its economy faster than the US and Europe. However, the shipping containers China needed to ship manufactured goods were stuck in those two regions. This led to a shipping container shortage for China.
In January 2021, Mark Yeager of Redwood Logistics commented: “There are about 180 million containers worldwide, but ‘they’re in the wrong place.’”
According to Triton International, orders for new containers were canceled in the first half of last year due to the pandemic, and estimates in April show that Chinese shipping container manufacturers have been producing only 2-3 weeks’ worth of supply in the market as they try to catch up.
Every spot on an available container in China has a massive price surcharge to reflect the heightened demand in the market. Prices for new containers are now “$3,500 per cost equivalent unit (CEU, a measure of the value of a container as a multiple of a 20-foot dry cargo unit) versus $1,800 per CEU in early 2020 and $2,500 per CEU in late 2020.”
The Suez Canal Accident Had a Significant Impact
In Mar 2021, the shipping vessel Ever Given got stuck in the Suez Canal and blocked the entire waterway for a week. This accident caused shipping charges to shoot up even more.
Although the Canal isn’t blocked anymore, the blockage caused delays for ships that were on their way to their destinations. Ports are already dealing with delays in berthing and dispatching cargo ships—further delays from incidents like these put more pressure on freight rates.
How Companies Can Reduce Their Shipping Costs?
Businesses aren’t at the mercy of ocean shipping companies—they can choose a different mode of transport, add new manufacturing hubs, or even handle delivery themselves where possible.
Container leasing and trading
Container Xchange provides a flexible and scalable container solutions that can be used by start ups, small and medium leasing and trading organisations or the largest of global leasing organisations. Xchange leasing platform can help reduce cost to grow your business much more quickly than using an inhouse system.
- Monitor the entire acquisition process from container creation to availability in the depot.
- Store costs accurately and export directly into other systems, such as the financial accounts.
- If a contract is re-negotiated or extended, a new version can be easily created from the original or a standard template, eliminating the need for multiple data entry.
- Each booking affects the inventory status of equipment, reserving specific units for on-hire and forcing the required quantity to be entered so that the depot stock function can identify outstanding requirements.
- All off-hire charges entered in the contract will default through to off-hire entry, ensuring that the correct charges are invoiced at all times.
- Invoices are automatically generated from contract, on-hire and off-hire information in one central system.
- An overview is available of all units currently in depots and users can view by location or equipment.
- Sales order functionality enables users to reduce administration time associated with the sales process, maximise profits, decrease storage time and enhance the sales flow.
- Profit and loss calculations are accurately stored to help control and guide future sales pricing.
Do you know you can save too much money with this shipping method? making your trading and leasing container extremely guaranteed to reach your customers faster.
Move your manufacturing locations
China is the global manufacturing powerhouse, but it’s now become the global shipping bottleneck. The ongoing crisis is a lesson that businesses shouldn’t be entirely reliant on one country for their manufacturing needs and should instead move their manufacturing locations to mitigate risk.
Look at outsourcing your manufacturing outside China, preferably closer to your primary markets. One viable manufacturing alternative to China is Vietnam. A 2021 report shows that labor wages in Vietnam for that year were $2.55/hr, while they were $5.21/hr in China.
Go for an online trading platform where you can
Using a online trading platform you can gain control and flexibility while saving cost effectively at easy. You can also simplify your manual workload with automated click making your work as simple as the container itself.
Online-trading platform requires less capital up front to start trading and leasing containers on your own without using a third party, but it’s cheaper in the long run because you’re not beholden to shipping price fluctuations. It’s not just ocean freight; third-party logistics providers (3PLs) that offer multi-modal logistics are constantly increasing their shipping rates, which affects your bottom line.
With this service you can completely take over your container operations process right away. By working with an online platform, you can refine your internal processes to make a smoother container transition to an online trading model.
When you go for online trading platform, you need a system that can help you manage your container operations. Neu Marke give you guidance and direction on which platform you need to scale your global trade logistics. The most reliable for your container end-to-end trading and leasing is our partner:
- Plan and schedule your buying and leasing container with just few click and get insights on container prices before purchasing after a seven days free trial in advance, you can get a 15% discount by contacting us. You can get a product tour in seconds by simply entering your email addresses.
- Automate and simplify your container manual paper workload for clearance with custom routes by balancing workloads for each of your container. You’ll be able to ensure that each of your containers has a similar number of orders or hours in the field.
- Live Tracking gives you visibility into exactly where your container is throughout their shipping or repositioning. You can see if a member of your team is delayed or has run into issues in the field.
- On your customer’s end, We offers a number of features that upgrade their customers experience like insurance and handling your transaction after you have negotiated with your merchant on the trading platform.
- Provides a flexible method to set-up and maintain the type of contracts that conform to industry requirements.
- Realtime Customer Notifications inform them where their container is via email and text.
- Automatically generates emails for dispatching quotes, invoices, release notifications and bills of sales.
Shipping Prices Aren’t Getting Cheaper—It’s Best to Be Prepared
ING estimates that new container capacity won’t bring shipping prices down until 2023. So as a small business, you need to think about the long-term health of your business and act accordingly. It’s important to keep you customers satisfied to maintain a high level of trust.
To improve customer trust in your business, you need strategic guidance to lead you in the right direction. To reposition, trade and lease containers to save cost and have control of your transaction click here.
If you choose to go the an online trading platform, Neu Marke is here to make the transition easy for you. Our partnership and collaboration with digital logistics solution companies is easy to use, and it’s free to help you get started!