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Soaring container rates risk stifling post-COVID recovery

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The surge in international container-shipping rates in recent months has left companies reliant on maritime transport facing delays and mounting costs that risk bogging down a post-coronavirus economic recovery.

The spot rate for shipping from Shanghai to the U.S. West Coast jumped to $4,000 per 40-foot container, according to the Shanghai Shipping Exchange — 2.4 times the year-earlier figure. Rates from Shanghai to Europe quadrupled to $4,400 per 20-foot container. Spot prices for shipments to Southeast Asia, South America and South Africa rose three- to sixfold to the highest levels in data going back to 2009.

The impact is reverberating across Japan’s businesses. A retailer that sells household products made in China and elsewhere said shipping costs increased dramatically, starting in December. Shipments from China and Southeast Asia to Japan can now cost more than four times what they used to, depending on the day of the week, according to the company.

The shipments themselves face delays as well. Some of its stores have sold out or are close to selling out of cleaning equipment and storage products.

A midtier farming machinery builder was forced to delay a Europe-bound shipment’s departure to February from January. “We weren’t able to cover the surge in shipping costs on our own, so we had our European client cover 50% this time as an exception,” a company representative said.

Another manufacturer, which exports auto parts from Southeast Asia to North America, said shipping companies have turned down certain cargo even when offered peak prices.

The company is working on improving its logistical efficiency and plans a comprehensive cost-cutting drive to help absorb the surge in shipping rates. But it will still likely be hard-pressed to cover the entire difference on its own and may eventually need to consider price hikes.

Shipping volumes have ballooned since last summer, which saw a surge in shipments to North America. Consumers cooped up at home snapped up products to suit their new lifestyles, with demand for big-ticket furniture and appliances in particular fed by a stock market rally and loose monetary policy. Shipments of auto parts and semiconductors picked up in the fall as well.

Maritime container shipments from Asia to the U.S. jumped 28% on the year in December, marking a fifth straight month of double-digit growth, according to the Japan Maritime Center.

This has led to containers piling up in the U.S. Exacerbating the problem is congestion at ports on the West Coast, where the surge in volume and the need for coronavirus precautions have slowed down cargo unloading, leaving ships and their containers stuck.

Cargo ships can currently wait a week or more before unloading there. A new cluster of coronavirus infections was discovered at a Los Angeles port in January, and there is concern that shipments could face further delays and rate hikes.

The tight global supply of containers has contributed to the jump in shipping rates to other destinations, including Europe, where shipments of personal computer peripherals and auto parts have begun picking up again, albeit somewhat later than in the U.S.

Shipping companies are working on an international framework for sharing empty containers, though industry insiders do not expect a quick fix. “I don’t think the container shortage will go away until at least May or June,” said Takashi Maruyama, a director at Mitsui O.S.K. Lines.

Source: Nikkei

The post Soaring container rates risk stifling post-COVID recovery appeared first on Global Cargo Insight.

Photo by Alexander Schimmeck on Unsplash

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