And at a certain point, some businesses are just being priced out,” Judah Levine, research lead at Freightos, said during a company webinar last week. “We’ve seen customers have to make really tough decisions, prioritizing what inventory they absolutely need and which they don’t.
Importers of low-value commodities, such as wooden assembled furniture, that built their business models around $1,400 shipping rates have stopped placing orders because they are losing money under current market conditions, according to shipping analysts and practitioners. Soaring transportation inflation is more than some can absorb. Rates from Asia to Northern Europe climbed 4% since last week and are more than eight times higher than a year ago and 2.5 times more than at the start of the year. East Coast quadrupled to $19,620 per forty-foot equivalent unit.
West Coast rates at $18,345, six times higher than a year ago, and the price for shipping to the U.S. On Wednesday, the Freightos Baltic Daily Index adjusted its methodology for tracking ocean shipping rates to include for the first time premium surcharges required for bookings, substantially raising transparency into the real cost paid by cargo owners. The quote was an outlier - the type primarily for customers asking to move large backlogs of boxes all at once - but is an indication of how desperate some shippers are and how selective carriers can be when they hold the cards. “It was a nice way for the carrier to say, ‘We’re not interested in any more business,’” Grossgart said. One ocean carrier told a company it would cost $32,000 to ship a group of standard containers from Shanghai to Los Angeles, Craig Grossgart, senior vice president of ocean at SEKO Logistics, said during a briefing for reporters late last month.
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The logjam, which is adding weeks of delay for major export trades from Asia, has been exacerbated by a series of weather- and COVID-related events, as well as operational mishaps. Vessel operators have no extra ships to meet a tidal wave of freight demand, containers are in short supply or can’t get quickly repositioned where needed, and destination ports are piling up with boxes because they can’t keep up with the volume. Purchasing ocean transportation has become so expensive that many companies with lower-value commodities can’t afford to import anymore, analysts and logisticians say. The blows to the global supply chain never seem to end in 2021, resulting in delays that have sharply reduced the system’s effective capacity and put upward pressure on shipping rates that began reaching record highs months ago.
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