Factors of high shipping costs

Shipping costs have risen sharply this year and are expected to continue rising, reducing the chances of a return to pre-pandemic levels in the short term. According to multiple sources, shipping costs have increased at least three times this year, and in some shipping companies, they are sometimes eight or even ten times higher than they were before the pandemic. There are several reasons for the sharp increase in freight costs; Such as the sudden unbalanced growth in demand and focus on seaborne goods and products, precautionary measures against the coronavirus epidemic, the shortage and high cost of seaborne alternatives, the slow expansion of sea capacity, congestion in ports and overstocking of goods, lack of storage, and the crisis of freight drivers in some countries Developed, high oil prices.

The recovery of the global economy has been uneven, particularly in the import and export sector, with some countries continuing to export below pre-pandemic levels, while others have recovered successfully; What caused confusion between shipping lines or cancellation of sailing or some ships and containers are returned on the road with low or no load. On the other hand, port closures, blockages and congestion in many major ports of the world have led to ship delays and confidence in shipping dates has fallen to its lowest levels in a decade. Some major international ports suffer from importers’ delays in receiving goods, and importers’ storage capacity has decreased due to the sharp increase in import requests, which prevents them from receiving goods and slows the port’s ability to pass goods and products. Also, some countries around the world have experienced; Like the United States and the United Kingdom, a shortage of truck drivers; Which increases the hassle of importers to receive their shipments. Port congestion with ships and cargo impedes the flow of sailing ships and trucks with long delays and reduces the effective supply of ships and the efficiency of sea and truck transportation.

Epidemiological precautions saw ships’ crews changed several times, and ports reduced manpower and sometimes closed; Which reduced the efficiency of unloading and transporting goods and merchandise. Finally, there is news that China’s draconian measures to combat the spread of the virus have delayed ship calls and sometimes led to labor shortages at ports. Pandemic fears resurfaced in China; This brought docking delays to 16 days in some cases.

The demand for container ships has grown strongly in recent years, and this year at a record pace, which puts it under tremendous pressure that is not expected to decrease to normal levels until 2023. The severe shortage of containers has forced some importers to delay importing non-essential items, as there is said to be a market It has very high prices for black containers. To make matters worse, there are a lot of misplaced containers. Complaints are growing in the United States about the acute shortage of empty containers being shipped to Asia for the most expensive produce, rather than diverted to American farmers to ship the grain to Asia; What hurts US agricultural exports?

Shipping costs constitute a small part of the cost of goods and merchandise, but their sharp rise will negatively affect consumers as they will be added to the prices of goods and products. The cost of low-value and heavy items and products will increase by a greater proportion than the cost of expensive items. Some sources estimate that rising shipping costs could increase inflation by one to two percentage points in the United States and Europe this year. Not only that, but significant increases in shipping costs can reduce the competitive advantage of some goods and products in certain destinations; Which may affect its availability in the market or even disrupt it. Shipping costs make up a large part of the cost of some products; Such as low-priced furniture, building materials and wood, to which she is the most sensitive. On the other hand, the sharp rise in freight rates and containers in particular led to a significant increase in the revenues and profits of shipping companies. Some sources reported the high cost of shipping to the Arabian Gulf from some Asian countries; Like Japan and China, because of the woes of Asian ports.

Marine demand is expected to grow faster than global freight fleet growth this year and next, adding pressure on shipping and its pricing. Some experts don’t think shipping costs will drop anytime soon, and may not return to previous levels in the future. That is why we are seeing significant price increases for some products from relatively remote locations, while their availability may decrease. In line with the current situation, companies need to change their strategies to reduce the negative impact, as higher freight rates will push some import and export destinations to move to closer geographical locations, increasing the attractiveness of local products. In addition, the high cost and complexity of shipping will motivate some industries to move from certain countries, such as China, to other countries, such as Vietnam. Increasing transportation costs have created opportunities for our region to take advantage of its geographical advantages and develop its logistics capabilities and industries that are more sensitive to freight.

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