The Rise of Freight Shipping Rates in 2021

The Rise of Freight Shipping Rates in 2021

Freight shipping rates first rose in Autumn 2020, and continue to climb in 2021, especially for international shipping prices.

According to Freightos, the cost of a shipping container is up 80% since November 2020 and has almost tripled over the past year. The price surge impacts all goods transported by sea, air, or truck freight along major global trade routes – or nearly 80% of the world’s commercial trade.

The Covid-19 pandemic unleashed a cascade of unique stresses on the global supply chain. Despite adjusting over the past year, freight companies are still battling the logistical hydra unleashed by the lockdowns.

Presently, shipping prices are surging, especially international shipping prices, due to shortages of container space amidst soaring global demand. Contributing to this expensive logistical bottleneck is the global dislocation of freight containers, congested ports, and labor shortages, among others.

“It’s multiple different bottlenecks all at the same time…like a train wreck in slow motion,” said Lars Jensen, CEO of the logistics consultancy SeaIntelligence.

Lack of capacity has forced freight companies to raise rates, and experts say the trend will continue through 2021. Read on to learn about the factors that continue to drive up the cost of freight shipping rates.

5 Causes of Rising Freight Shipping Rates
The pandemic hit and ocean freight rates rose, unsurprisingly. But with lockdowns easing and vaccines in circulation, what explains the inflating price of an empty shipping container?

A handful of persistent issues plague the freight industry and keep international shipping prices high, including:

1. Increased eCommerce adoption worldwide
Lockdowns and stimulus checks paved the way for increased online spending, even among formerly cagey demographics like baby boomers. As spending habits shift, increased parcel volumes are boosting demand for container space. US-inbound cargo volumes in December 2020 were up 23% from the year prior, squeezing the already tight capacities of sea freighters.

Meanwhile, couriers like FedEx are struggling to handle the crush of last mile eCommerce deliveries. Parcel volume from eCommerce is expected to reach 100 million per day by 2025. Already strained, logistics professionals are working overtime to recalibrate for a future centered around global eCommerce.

2. Labor shortages
Ports, warehouses and manufacturing hubs are suffering from a labor shortage. Despite post-pandemic safety measures, people have been slow to rejoin the workforce.

Sluggish employment is largely a function of poor vaccine access in certain geographies and stimulus-buoyed incomes in the States. Without adequate staff, logistics companies must operate at reduced capacity and raise prices to compensate.

3. Sporadic openings and closures
Inconsistent access to key ports makes it difficult for freight companies to regulate capacity on shipping containers. Economies are keen to resume manufacturing output, but face new outbreaks and closures, especially in Asia. Variable lockdown schedules, in turn, impede normal scheduling for pickups and deliveries. This means access to key shipping infrastructure is unreliable, and the flow of goods is stuttered.

This on-off activity causes goods to languish in ports and delivery times to slow. When new capacity becomes available, companies are more active in managing operations, which keeps labor costs up.

4. Port congestion, closures create delays
Port congestion, especially in the US, is a major problem for freight professionals. Fewer vessels are keeping to their delivery schedules while the average delay length for late vessels is extending.

For example, the port of Los Angeles saw 42 ships anchored offshore in January 2021 – yet every warehouse within 60 miles was already full. Without anywhere to stash cargo, ships are forced to idle offshore until space is available, and indefinite delays are costly.

5. Shipping Containers In Short Supply
Last year saw a massive dislocation of shipping containers around the world. In other words, much-needed empty containers are stuck in understaffed, congested, or locked-down ports.

When fewer ships arrive at US ports, fewer containers are available for a return trip to Asia or Europe. This results in huge pileups of goods in stateside warehouses and port terminals, causing freight delivery times to slow overall. Pickups for freight truckers are slower in clogged ports, also, including those picking up new loads and dropping off empty containers.

The result is an imbalance of available containers that keep rates elevated. Experts suggest we may see greater storage of goods in warehouses for retailers as a way to mitigate against shortages, though this incurs the risk of held inventory gone to waste.

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