When ocean freight rate will come back to normal after the pandemic?

Since the start of the pandemic, the cost of shipping containers from China to the US has been around $10,000. Compared to the pre-crisis rates, they are still up 10 times. Despite the global supply chain’s stabilization recently, the freight system is still not back to normal.

The average price of a 40-foot container that was shipped from China to the US West Coast ports in 2020 was around $1,500. In September 2021, it was more than $20,000. By the end of that year, the rates started to decrease, but they stayed at around $15,000 until 2022. Meanwhile, the cost of shipping to Europe has also decreased at around the same speed.

China/East Asia to North America West Coast Ocean Freight Rate
Ocean Freight Rate from China to U.S

Aside from factors such as labor shortages and the rising cost of transportation, other factors such as the demand imbalance and the weather have also contributed to the increase in the cost of shipping containers. Some of those issues have been solved so far, but some others appears.

One of the most outstanding factors that has arised and contribute to the increase in the cost of shipping containers is the backlog at the Shanghai port. According to data from VesselsValue, the number of ships waiting to load or unload has increased from 100 to 300 since the beginning of the covid ourbreak in Shanghai. According to data from Bloomberg, over a million containers are currently having to find new routes to Europe due to the railway project connecting Eastern China and Western Europe.

The cost of shipping a couch made in China to the US has increased from $50 to $500. This has caused the landed cost of the container to increase, which in turn boosts inflation. Also, due to the congestion and delays at the ports, some goods are taking longer to reach their warehouses in the US.

Although it’s difficult to predict when the shipping container cost will decrease, it’s believed that it will take several years before it reaches pre-crisis levels. As a result, some companies have started to move production closer to their consumers and have started importing products earlier.

China used to be able to supply quality product at a cheap rate and with speed. Now the situation has changed. Manufactures are looking to diverse their supply chain outside of China.

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