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Why Do Global Shipping Costs Keep Rising?


Oct 19 2022

If you've made a shipping order in the past few months, you've probably realized how high container shipping rates are. Today, overseas shipping costs have risen dramatically, and competition for ocean freight capacity has become normal. And the shipping container cost will reach record highs in the future and remain higher than pre-epidemic levels in the long run.

As we know, the COVID-19 pandemic has greatly impacted the global supply chain since 2020, and the continuous rise in shipping prices directly reflects this. Still, are there other reasons container shipping rates have recently become so expensive?
 

Continuing Global Imbalances

Since the beginning of 2020, many problems have accumulated, including imbalances in cargo production and demand, differences in the timing of lockdowns and openings across countries, shipping lines cutting capacity on major shipping routes, etc. All of these problems from an unbalanced recovery will continue to exacerbate world trade conditions, putting more pressure on maritime capacity and container shipping costs in the short term.
 

Shipping Containers Shortage

During the pandemic, China opened up its economy faster than the US and Europe, resulting in many shipping containers being held up on both continents. At the same time, China is facing a shortage of shipping containers. In other words, almost 200 million containers worldwide but all of them are in the wrong place.

Although the influx of new container capacity and the upcoming increase in shipping capacity will ease the pressure on global shipping costs, it will also be difficult to bring freight rates back to pre-pandemic levels.
 
sea shipping
Sea Shipping
 

Increased Consumer Demand

Since the pandemic, many countries have seen a weak brick-and-mortar economy, and more consumers are choosing e-commerce marketplaces to purchase goods. From small items such as clothing and daily groceries to large items like furniture, electrical appliances and production equipment, consumers buy online not only in large quantities but also in a wide variety of products.

Global demand is surging, but supply stays the same or even decreases. Such a large volume of shipments can bring higher delivery-related costs in sea shipping. Likewise, disruptions in the supply chain force enterprises to charge more for products to offset their shipping costs.
 

Soaring Price of Fuel

The continued increase in fuel costs has had a ripple effect throughout the global economy. One of the most severely affected industries is shipping, which is responsible for transporting about 90% of goods worldwide. Studies have shown that the overseas shipping cost has more than doubled in the past year, driven by trade imbalances between Eastern and Western economies, residual lockdown effects, and labor shortages.
 

Fewer Labor Shortages

Due to the residual pandemic and the war in Ukraine, there are more or fewer labor shortages around the world. Russian and Ukrainian seafarers make up about 15% of the world's seafarers. However, due to conscription laws, many Ukrainian seafarers cannot leave their country, leaving a huge gap in the shipping industry's workforce.
 

Conclusion

The impact of high shipping container costs disrupting global supply chains, and the effects may last for years. Enterprises need an efficient logistics strategy to minimize transportation costs and maximize profits. HaiYuan is a professional freight forwarder from China. Please feel free to contact us to learn more about our transportation-related services!
 

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