Competition in international package shipping has become quite intense. However, it drives up shipping rates from time to time. It is anticipated that freight rates will continue to set new records this year and remain above their pre-pandemic levels in the longer term. Meanwhile, additional capacity is just slowly coming online.
There is no quick-fix cost in international package shipping
Freight charges for all modes of transportation along important trade routes have increased significantly since the fall of 2020, and this trend has continued in the early months of this year. Charter costs for container ships have more than quadrupled in the past year, and the cost of transporting goods across major trade channels has also increased dramatically.
As increased worldwide demand continues with limited improvements in transportation capacity. Well, the disruptive impacts of local lockdowns. Also, prices are unlikely to level down for at least the second part of this year. Meanwhile, international freight shipping may be higher than before the epidemic.
Here are three reasons why prices won’t be coming down anytime soon.
1. With Global Imbalances Continuing, Prices Are Expected to Rise Higher
Inequities in production and demand have developed since the start of the epidemic due to the varying rates at which nations have closed and reopened their borders, as well as shipping firms reducing capacity on main routes and shortages of empty containers. As the recovery has continued, global demand has rebounded quickly, particularly in industries highly dependent on cross-border trade.
2. There are Few Viable Options for Maritime Transport
Rising transportation expenses are difficult to prevent at the time since there are few viable alternatives to ocean freight. Shipping electronics via plane or train, not to mention the ‘Silk Road,’ is an example of a higher-value commodity that might benefit from a more specialized mode of delivery. Nonetheless, there is a supply shortage, and prices have increased. Freight prices have increased from around 5% to more than 20% of sourcing expenses for shippers of low-value products.
3. An Uneven Upturn
While some nations’ exports have already surpassed their levels before the epidemic, others, including the United States, have yet to catch up to output recovery. While the world’s major trading nations and their trading partners continue to improve, international product commerce is expected to rise further. Some issues plaguing international business, such as the redeployment of empty containers, are likely to worsen due to the uneven recovery and intense competition for maritime freight capacity. Due to these factors, there will be increased downward pressure on freight prices.
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