China’s Container Shortage Pushes Global Freight Prices Through the Roof

December 4, 2020

The corona pandemic and its global effects has resulted in a serious container shortage in China. The supply of freight containers, that currently are incapable of meeting the huge demand around the world, are driving logistics and freight costs for European and American companies through the roof.

 

Forklift truck lifting a cargo container

 

As the corona pandemic continues to rage around the world, several logistics related issues emerge. In many European countries, ports have been forced to reduce the capacity, resulting in many Chinese containers arriving to the port but getting stuck there. In normal circumstances, the emptied containers get shipped back to China as soon as possible, but not now.

In the US, the capacity reduction in the ports has resulted in warehouses running dry. Companies relying on Chinese imports are facing huge trouble, which has pushed the demand for container freights drastically. As a result, freight costs to the US has surged, shifting the focus of all freight companies to only prioritize the US. In September, a 20-foot container from China to the US cost 3,000 USD, while the same container cost 1,100 USD to Europe, a price that has risen drastically since.

Now, the shortage of containers pushes freight prices through the roof. The price of a 20-foot container to Europe, which usually costs around 1,000 USD this time of the year, are now priced around 2,000 USD – an increase of 100%. On top of that, big freight companies (Maersk, CMA, Cosco, HMM, etc.) are now introducing a PSS (Peak Season Surcharge), meaning an additional 300-500 USD added on top. Companies with a lot of Chinese imports are now forced to look towards other alternatives. Our recommendation is to look into the possibility of moving production closer to the main customer market (at least temporarily), placing orders more in advance and engage in a tight dialogue with your freight carrier to keep updated on the latest news.

Graph showing cost of container shipping from Shanghai 2020

Except rising prices, the container shortage will result in canceled orders and heavy supply chain disruptions, something that all industries might be affected by. Orders that were supposed to be sent in November are instead expected to leave China at the end of December. To secure a container at a freight ship, local connections are almost mandatory at the moment. Asia Perspective’s analysis points towards that the shortage will continue to be an issue to, at least, June next year.


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