Rise in Freight Cost - Will there be a relaxation for shippers? In recent months, the international trade market has been facing multiple shipping challenges. Some countries have supplies to deliver to the other countries in need. However, the shortage of containers is destroying the regular chain of supply with time-based delivery. Freight costs are swelling to no end. In the 2020-2021 Financial year, freight costs have encountered the highest base that is unaffordable for small business and hardly-surviving shipping companies. One of the primary reasons for such hardcore mounting rates of freight is considered COVID-19. Due to this deadly disease, each country has been struggling to provide medical care to its citizens. Some countries are going through a lack of oxygen cylinders. In contrast, some countries are struggling to purchase vaccination. And, luckily if they find a vaccine supplier in countries like the USA, Russia, and India, the high-end freight cost causes them to face the most significant loss of all time. This is not only a fearful time for households in countries but also businesses. Manufacturing companies and oil-producing companies have stopped their processes because of the chances of COVID-19 widespread at a greater level. Since the lack in production and manufacturing is so high, as a result, the imbalance between international demand and supply of goods, raw material, and others have become noticeable. Not only this difference is pushing small businesses into a loss. But also causing the pricing pressure to increase persistently. In recent months, the rise in freight costs has shocked the shippers. The USA's freight cost has increased by $20 per barrel. However, the main question stands, is COVID-19 the only reason for the Rise in freight costs? The answer is NO. www.Cybex.The expert team examined the current international trade situation and came across some less-attentive reasons that may be responsible for such tragedy.
Split Shipments Methodology acquired by shippers. Split Shipment is a type of shipment method when the shippers or eCommerce retailers split the shipping products based on the category and sub-category. Let's suppose, a retailer/exporter is shipping 100 trucks and 100 cars to 10 different locations. Now, in that case, he will require 10 different shipping sources to meet the
requirement of its clientele on time. Now, it has been observed that larger and reputed importers and exporters adopt this methodology to satisfy their buyer's needs. But, it cost them a heavy freight value. Henceforth, if the demand of shipment services is higher, the price will undoubtedly upscale.
Brexit and shipment complications In 2021, if you ask anyone, there's nothing more fearful and impactful than COVID19. However, Brexit has increased the level of trouble for shippers in the UK. It has created a friction in the pattern of border-based trade. Hence, the shippers are under great loss possibility if they do not "go out of service." In the UK, many shippers have cancelled their contracts made before the COVID-19 pandemic.
China and abandonment There is no doubt that the entire world of trade is going through the most-observed shortage of shipping containers in history. Now, China is the largest manufacturing country in the world. However, countries like India, USA, and UK have abandoned China for obvious reasons. Former President of the USA, Donald Trump, accused the country of intentionally attacking the entire world with CoronaVirus. Whereas, India and China's recent war on the border leaves no hope for both countries to come together in business anytime soon. Therefore, now, countries in need are facing other countries for help. But, it is business-nature, when you are in highest need of something, its price goes high automatically. Hence, contributing to the rising freight cost.
Freight Cost Statistics of different countries:
In the USA, current shipping freight cost rates for 20 containers is approximately $1200. Today, exporters are finding alternatives for their regular shipping method. A freight as heavy as 500 kg cost over 2400 USD. As per the reports, from 2019 to 2021, the cost of logistics in the USA has increased by 0.6%. The total cost of logistics in the USA covers up to 7% of the total GDP. In the USA, a report says that up to 39 ships containing exporters’ containers were lost in the sea between 2010 and 2019. Thus, exporters tend to insure their shipping goods which indirectly increases the freight cost.
Due to rise in freight cost and covid-19 epidemic, exporters have slowed their businesses down. According to Shanghai’s Port annual revenue in 2020 -2021, its revenue has decreased by 29%. One of the major reasons is increased shipping costs which exporters cannot afford. If we talk about international freight gateways, Ports at Atlantic Border have encountered the highest revenue from freight. In 2018, the freight cost revenue touched 1 billion approximately. In year 2020, US Department of Transportation reported that the highest trade was undertaken via Water (i.e.., ships). Whereas, second highest import was undertaken via pipelines. In 2020, domestic transportation of goods relied on trucks and rails at the largest.
For more statistics and international trade data, visit www.cybex.in.