It is undeniable the current shipping cost from China has risen very high, affecting companies and sellers of imported products. As the demand for consumer goods continually increases due to the covid-19 pandemic, importers have been grappling with the problem of high shipping cost, delayed delivery, and container shortage, among other issues. Studies show that shipping prices from China which have increased by about 360%, are causing inflation in import commodity prices.
Why Shipping by sea from china is high?
Lack of ShortTerm Relief
Due to the Covid-19 pandemic, global shipping costs skyrocketed to an all-time high. The shipping rate in 2020 has increased by 360% compared to 2019. There have been rapid increases in freight rates, such as container and dry bulk along important trade routes, without any attendant short-term relief. This is a significant reason for the current increase in the shipping price and might continue if no relief measures are implemented. The disruptive lockdown has resulted in increased global demand for limited shipping capacity.
Non-stop Global Imbalance
Global imbalances caused by the locking down of countries at different times halting production, global shipping, and other economic activities coupled with increased demand and limited shipping company capacity because of the pandemic push up the shipping price to an all-time high. When things were getting back to normal after the pandemic and China factories and ports resume activities, other US and several European countries could not import from China because they are still under lockdown restrictions. This global imbalance also contributed to an increase in shipping costs from China to a large extent.
Limited Alternatives to Ocean Freight
Excessive dependence on ocean freight also contributed to the increase in the shipping price. Though there are alternative shipping modes such as rail or air freight for moving high-value products such as electronic devices, most importers prefer using sea freight to ship their goods. That is why ocean freight accounts for 90 percent of the world’s total shipping. The current increase in demand and the limited shipping capacity resulted in a hike in shipping costs from China. Little wonder why the price of low-value products such as household items, apparel, and toys has since soared.
Delay Due to Port Congestion and Closure
One of the major problems of the post-pandemic period in international shipping is port congestion resulting in shipment delay and cancellation. Though there are signs of slight improvement and probably will continue, the situation was some of the significant reasons for shipping prices surge.
Excess demand for household products due to pandemic
Since households started staying at home during the pandemic, their spending habits shifted from service industry to household goods. Since they could not spend money at restaurants, travel or concerts, sports events, they poured this money to renovate goods, white goods, furniture at their homes. So, import demand from China to US tripled compared to pre-pandemic levels, but the container capacity did not change. So this supply-demand imbalance brought a scarcity to ocean transfers and both lengthen the durations of the transport and increased the prices enormously.
This is another significant reason for the increased freight rate. As companies are producing more products and there is swelling demand for product supply, there are fewer containers causing cancellation or delay of shipment, thus pushing up the rate.
Lines Add Surcharge to Ocean Freight Rate
In addition to the many challenges of the shipping companies caused by the pandemic, shipment delay, shortage of containers, port congestion, and more, shipping companies still had to struggle with the newly imposed surcharges by some steamship lines. This has resulted in a massive increase in shipping prices.