Why Global Shipping Costs Will Continue to Rise
Since 2020, shipping costs have been steadily rising. With very little sign of short-term relief, these costs are likely to continue to rise going forward as surging global demand is met with ongoing disruptive effects of lockdowns and pandemic-related restrictions.
Let’s take a closer look at some of the reasons why global shipping costs have and will continue to rise going forward.
Few Alternatives to Ocean Freight
The lack of alternatives to ocean freight means that it is very difficult to avoid the current surging transport costs. Whether it be higher value or lower value products.
Capacity is currently limited, and tariffs have spiked, meaning that alternative modes of transportation that would normally be an option are not so viable.
As a result, fluctuations in product availability, and/or price increases are inevitable for customers.
Port Congestion and Closures
Overall shipping performance sits as its lowest in ten years of records. Delays for late vessels continue to rise, and lower rates of vessels keeping to schedule means that 2021 has picked up just where 2020 left off.
Although average performance is showing to improve since the share of vessels reaching their destination timeously stopped tumbling in April, congestion is an unavoidable part of the problem.
Continued Global Imbalances
Since the start of the pandemic, there have been growing imbalances in the supply and demand for goods.
With countries opening and closing at different times, keeping up with the demand surge deemed challenging. That, in combination with shipping companies cutting capacity on major routes caused problems for many.
Unbalanced Pandemic Recovery
Although the pandemic took the entire world by storm, not all countries were affected equally; some are already exporting at the level they were before the pandemic, while others continue to grapple with being left behind the overall recovery in output.
How to Address High Freight Rates
While the pandemic is set to still lead to disruptions, along with the lack of capacity, global supply chains have become stretched.
Although there is not much we as individuals can do to improve the rising global shipping costs due to the numerous variables contained within the system, we can reduce associated acquisition costs by extending our use of global trading platforms.