Wednesday, February 8, 2023

China-Europe Shipping Fee Trips Threatens Goods Supply

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The cost of shipping goods from China to Europe has more than tripled in the past eight weeks, reaching record levels due to a shortage of empty containers resulting from the the pandemic disrupts world trade.

The cost of shipping a 40-foot container from Asia to Northern Europe has risen from around $ 2,000 in November to over $ 9,000, according to shippers and importers.

Lars Jensen of the consulting firm SeaIntelligence said: “It’s a bottleneck issue. . . These prices are determined by customers who compete for a limited resource: containers. “

Thousands of empty containers were left in Europe and the United States in the first half of 2020 when shipping lines canceled hundreds of crossings as coronavirus lockdowns caused a sudden slowdown in world trade. When Western demand for products made in Asia rebounded in the second half of the year, competition among shippers for available containers skyrocketed freight rates.

John Butler, Chairman of the World Shipping Council, said: “We have gone from a tremendous decline to historically high freight volumes and there is now more than what terminals can efficiently handle.”

Congestion in ports is contributing to the rise in prices, with shipping companies charging additional fees to compensate for longer waiting times, he added.

Since November, shipping costs to Europe have been exacerbated by the diversion of containers to transpacific routes. In contrast, the cost of shipping from China to the United States has leveled off since October, when the Chinese government asked shipping companies to cap their rates.

Philip Edge, managing director of UK freight forwarder Edge Worldwide, said some companies were charged $ 12,000 per container, up from around $ 2,000 in October.

The British Home Appliance Manufacturers Association said in a statement that its members have reported increases in shipping costs of up to 300% since the start of 2020, including cases “where increased costs shipping is greater than the retained earnings of the goods. . . these costs will therefore have to be passed on to end users ”.

“Producers don’t expect to be able to absorb these huge increases in freight costs,” he said.

The owner of a Manchester-based leisure goods importer, who declined to be named, said the container shortage was “having a huge impact” on business, with some orders placed in November still awaiting release. shipped. “The question is whether you pay the $ 12,000 [cost] now and pass those prices on to customers or wait and risk running out of stocks? “

Disruptions and delays are starting to affect global supply chains, economists say. “Signs of tensions are mounting,” said Neil Shearing, chief economist at Capital Economics, who warned that the pressure should “increase before easing.”

A recent survey by IHS Markit found that in December, delivery times for manufacturing suppliers in the eurozone hit the worst levels since the peak of pandemic lockdowns last April, and delays in transportation and general merchandise shortages at suppliers “have been widely reported”.

The companies surveyed said they were reducing their stocks of raw materials and semi-manufactures, leading to lower inventories, and reported rapid increases in input prices.

Bert Colijn, senior economist at ING, said that “supply shortages and higher freight rates could dampen trade growth a bit” and contribute to “temporarily higher inflationary pressures during the year” .

Shipping companies are hoping that the slowdown in Asian manufacturing that typically accompanies the Chinese New Year in February will allow carriers to tackle the growing order book and at least cause prices to cool temporarily.

But Peter Sand, an economist at the international shipping association Bimco, said container shortages are likely to continue for a long time until 2021, despite carriers having recently placed new container orders, which he called “too many. little too late ”.

Mr. Jensen said that although prices may drop slightly, “there is still a huge amount of goods waiting to be shipped.”

The pressure on maritime supply chains is expected to ease “when people have more options to spend on services” as coronavirus restrictions have been lifted, Mr Butler said – but “when it does product, everyone can guess ”.

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