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The combination of multiple factors has led to higher shipping costs, including soaring demand amid stimulus checks, saturated ports, and too few ships, dockworkers and truckers.
Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers.
The price for a container of goods from China to the U.S. West Coast and European ports has hovered near record highs for several months, and conditions are ripe for more increases even though spot rates usually soften this time of year. What’s more, new contracts being signed by some of the biggest U.S. importers indicate the spike won’t be a short-term blip.
A China Ocean Shipping Group Co. (COSCO) ship in the San Francisco Bay waits to enter the Port of Oakland in Oakland, California, U.S., on Tuesday, March 23, 2021. Exporters, importers and their agents are considering buying their own shipping containers and chartering vessels to avoid the sky-high costs and delays of existing services.
Most large retailers and manufacturers sign annual deals with the ocean carriers to lock in their container freight rates, in private negotiations that typically take place this time each year.
Along the bellwether trade lane linking Asia with North America, contract rates in recent weeks are coming in around $2,500 to $3,000 for a 40-foot container -- 25% to 50% higher than a year ago, according to George Griffiths, an editor on the global container freight-pricing team at S&P Global Platts.
“That’s showing that people are expecting this to continue, that they’re not expecting rates to come down any time soon,” Griffiths said. The container carriers “are going into this in a significant position of strength,” he said.
While there are signs of solid factory activity in the coming months, “reports of shortages in materials and labor, as well as bottlenecks in transportation, signaled some potential restraints on the pace of the manufacturing recovery,” according to minutes released Wednesday of the central bank’s Federal Open Market Committee meeting on March 16-17, 2021.
“We’re going to have a conversation about inflation,” said Jim Bianco, president and founder of Bianco Research, during an interview with Bloomberg Television. “If we see it, it’s going to have to accelerate the Fed.”
The higher shipping costs have been sparked by a combination of factors, including soaring demand amid stimulus checks, saturated ports, and too few ships, dockworkers and truckers. The problems are too broad to be remedied by any short-term fix and are creating ripple effects across U.S. supply chains. Find details.
Source: Online/SZK
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