Why are shipping costs booming up?

Since the pandemic started last 2020 the World faces a booming in shipping costs which is not only only pushing up the costs of the goods but it is also affecting delivery time all across the world.

Economic areas like US and Europe are nowadays seeing an increase in shipping costs which is up to 400% compare to the same period last year; such a shipping costs increase would scare everyone especially if you are shipping a low valuable product (ex. rubber granules) or a bulky product (ex. insulation foam), nevertheless the higher transport cost might be mitigated if you are shipping high valuable product where the delta cost for unit is a marginal cost…. So what is really happening?

The current situation has nothing to do with the oil/fuel price (which has been by the way quite volatile in 2020), the real reason lays behind the surplus of goods manufactured in China. The Asian Country has kept under control the pandemic starting from the second quarter of last year, with a strong border control and strict local measures, China has been able to recover its economy where manufacturing and shipping are back to normal. On the other hands the West is experiencing prolonged lockdowns and the “new normal” is still not in sight.

Consequence is that China is able to send goods to US and Europe, the demand has been perhaps also driven by the enormous amounts of medical products (masks, ventilators, etc..) required basically by every Country. Sending goods is creating an accumulation of containers in Western Countries and a shortage in Asia.

The options are limited.. in one hand we have that new containers have been ordered but the availability will not be right away and in the other hand the pandemic situation is still far from normal in Western Countries (until the vaccination campaigns will be fully rolled out) so we still have to endure for few months more according to Shanghai International Shipping Research Centre.

And what about ASEAN? How do we perform? Well, the situation is not sunshine and rainbows but nevertheless, in average, much better than in other Countries. ASEAN has been facing prolonged lockdowns and strict border closure and while some Countries are basically “Covid-Free”, such as Thailand or Vietnam for example, others are still experiencing restrictions like Malaysia where “working from home” is still widely common.

Say that rising (and volatile) shipping costs are just a recent inconvenience, during most of 2020 we have “enjoyed” quite reasonable prices with NO major changes until end of the year; we might even say that we have also seen some slight decrease due to the fall of oil price in the third-quarter.. unluckily this moment did not last any longer. 

We, writers of this article, are shipping containers to ASEAN (from Europe) on a regular base and what we are experiencing is slightly better than the rest of the world, the CIF rate form southern EU to ASEAN for a 20ft box was mostly ranging between 1000 EUR to 1500 EUR depending on the departure port and on arrival port. Those rates are no longer existing of course and in average we are facing an increase of “only” (allow us to use this word!) 50% which is of course affecting the Customer overall costs but all-in-all we really can not complain if compared to the other way round (Asia to the West).

Bangkok, 20Feb2021

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