China’s exports recovered fast from the COVID-19 pandemic but delivering goods overseas has become difficult due to increasing shipping costs.
In October, China’s export volume topped 1.6 trillion yuan, jumping 7.6 percent year on year, the seventh consecutive month of positive growth since the coronavirus outbreak.
The fright index cost by Shanghai Shipping Exchange climbed to 2048.27 last Friday, which was over twice April’s figure of 855.34. Containers have gotten costly, which means plenty of headaches for the shipping companies and the firms that depend on them on a daily basis.
These days, it can cost as much as $5,000, up from $1,300 in March, to put a container on a ship and send it somewhere. Some carriers are now charging even more than that, calling it a “peak season surcharge,” which is usually several hundred more dollars per container. And even at that high price, the containers are short in supply.
This cost increase has affected Wang Xin, a sea freight export manager at Kuehne+Nagel, who helps clients deliver products around the world by sea. His days have become even tougher during the past few months.
The problem is that shipping containers usually move back and forth along the same route, but interruptions to international trade caused by COVID-19 now mean that many containers ship off to one port and then get stuck there. Many containers are being found on the wrong side of the ocean.
“It’s booming and carriers push up rates … equipment shortage is everywhere. Volume is suddenly booming and carriers are not prepared well,” said Wang.
The imbalance between the rising demands of exporters and the tight supply of containers is causing a worldwide challenge.
Freight costs up due to COVID-19
Freight rates between Shanghai and the UK rose nearly four times between March and November while rates from Shanghai to Los Angeles more than tripled.
“I’m in the sea freight industry for almost 25 years. I’ve not seen such a situation before because there were times in the past where it was isolated to a single trade link,” said Wong Siewloong, president of Asia Pacific at Kuehne+Nagel.
“During the European crisis, we saw the freight rate dropped to double-digit. But this time, the big difference is we are seeing the push of demand and supply imbalance across all trade links,” said Wong.
Wong added that there’s been a migration of orders from Southeast Asia to China as other countries within Asia were still in lockdown.
Trading firms face delayed deliveries, losses
The heaviest impact is being felt by local trading firms, such as Shanghai-based textile exporter Orient International Holding Shanghai Textiles Imp & Exp (Orient International).
The company said that its orders had doubled or tripled as of September. But the sudden rise in freight rates has turned the seemingly good news around. Mainly exporting fabrics to Europe, Africa and the U.S., the company has seen its freight rates more than triple since September. Currently, more than 50 percent of the company’s deliveries are delayed, meaning big potential losses.
“We were planning to ship them to Sudan; scarf for ladies. But unfortunately, when the goods were ready, we were informed by the shipping land that no space was available,” said Jin Bo, a department manager at Orient International. “Until last week, they had hardly given us any space to let us ship the container.”
He Wei, a business manager at Orient International, said a potential solution is to shift to land transportation.
“We are thinking of switching from sea to inland truck transportation. This will save us a lot of time. Although the price of inland transportation is double the price of sea freight, it will save time and especially help our factory catch up with their production plan,” said He.
Though he said this is just a short-term solution as sea freight is irreplaceable for the large volumes and low costs that modern trade requires. He predicts that this round of rises in freight rates will continue at least until the spring of next year.