Ocean freight costs at all-time high . . .
Everyone is getting squeezed in global shipping. Increased demand for products from Asian countries combined with expensive measures to prevent further COVID-19 spread has left containers stranded in ports the world over. As a consequence, Asian exports are experiencing delays and there is a surge in demand for containers in Asia’s main sea ports. This has driven shipping costs to all-time high. Compared to last year’s prices, ocean freight rates from China to the U.S. and Europe have surged by more than 300 per cent.
Consequences for Canadian exporters . . .
The phenomenal increase in freight costs has led shipping lines to charge a premium for container space for exports originating in Europe and North America, as it can be more profitable for shippers to send empty containers back to Asia for reloading rather than have them wait unfilled elsewhere. In Canada, this compounds a pre-existing shortage of rail cars and the inherent challenges of transporting products across such a broad geography to coastal ports. For example, exporters of pea and lentil crops from the Prairie provinces have seen their harvests sit in storage instead of shipping to purchasers in India and elsewhere in Asia. The shortage has hit other commodities, prompting the U.S. Federal Maritime Commission to investigate “potentially unreasonable practices” around the return of containers.
An end in sight or the new normal?
Some industry insiders expect the situation to return to normal by the end of February, helped by an export slow down tied to the Lunar New Year holiday (February 12-26) in Asia. Experts have noted an increase in the number of new containers available on the market in December and January and a positive uptick in the Container Availability Index. Other industry insiders, however, believe that limited container availability, congestion at key ports, and a global economic recovery in 2021 will likely lead to increased production of goods, which will in turn keep pressure on the shipping industry. Ocean freight may be in for a continued crunch through 2021.
- Bloomberg: Global container shortage (video)
- Seatrade Maritime News: Container shortage – Chinese New Year set to be a turning point
- The Washington Post: Pandemic aftershocks overwhelm global supply lines