Ocean shipping costs rise to new highs amid heated demand
Ocean freight on the China-Brasil rote is skyrocketing. Import costs had already been rising in the fourth quarter and reached a new record this year of $10,000 per twenty-foot equivalent unit (TEU, a standard measure for containers)."We reached a historical level, I had never seen freight hitting this price," says Luigi Ferrini, senior vice-president of Hapag-Lloyd in Brazil. A year ago, the price of this same route average $2,000 per TEU.
Prices have been spiking mainly since October as the global economy started opening up again and demand for Chinese products grew, says Rafael Dantas, the director of importer Asia Shipping.
Not only Brazil-bound routes are experiencing price spikes. Trips from Asia to Europe and the US have also hit above-average prices of over $4,000.
The significant mismatch between supply and demand caused by economic fluctuations throughout the year is the primary explanation for the price swing - a "perfect storm for global flows of containers," says Centronave, which represents global long distance navigation groups in Brazil.
"Once the pandemic hit, many companies stopped issuing orders, there were dozens of [shipping] cancelations. But product demand didn't fall as expected, people just started spending differently. What used to go toward trips went toward household items, home office stuff. Local consumption increased all over the world, and then there were product shortages," Mr. Ferrini says.
At the height of the pandemic in Brazil, between March and July, 23 trips by ships from China were canceled. The number is equivalent to at least five weeks without container imports from the country.
In the middle of the year, it became clear to the companies that it would be necessary to resume orders. The increase, however, coincided with recoveries in Europe and the United States, leading to a fierce dispute over containers and vessels. Today, virtually every ship available in the world is in use, says Centronave. The result: freight rates have skyrocketed and, even after Christmas, they are still on the rise.
The situation is worsened by the fact that the pandemic has also reduced the efficiency in clearing cargo in terminals and warehouses, which have also suffered from social-distancing measures and the reinforcement of surveillance protocols.
To try to ease the bottleneck, between October and December, shipping companies launched 14 new extra loaders, raising the Shanghai-Santos route's capacity by about 14% -...
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