Shipping prices between China and the US have unexpectedly climbed to record highs, not long after the COVID-19 outbreak disrupted the global freight market. Rates have topped $20,000 per 40-foot box as increasing retailer orders ahead of the peak pre-Christmas US shopping season further strain global supply chains.
The Pandemic Is Not over Yet
While parts of the world have returned to their pre-COVID state, it’s worth noting that in most places, COVID is still a huge hindrance to business and a serious obstacle to the medical care system. Specifically, the acceleration of the highly infectious Delta variant in multiple countries has slowed global container turnaround rates.
Furthermore, severe weather like typhoons on China’s south coast has hindered the freight industry. All these factors have contributed to creating a dominant seller’s market in which shipping companies have been charging four to ten times their normal rates. The spot price per container on the China-US east coast route, one of the busiest shipping lanes in the entire world, has jumped over 500% from just a year ago.
According to the freight-tracking firm FreightosIt, the price hit $20,804 in August, compared to the $11,000 in late July. For the China-US west coast route, the cost is a shade under $20,000, while the China–Europe rate is about $14,000.
Prices aren’t expected to come down significantly until the Lunar New Year in 2022. The high rates also affect shipping from Southeast Asia to the US, even routes that bypass China entirely. How is it possible for the rates to jump so much in such a short period? COVID-19, even the Delta variant, as well as typhoons, were all well-understood phenomena before August. According to industry insiders, changes in the calculation method have played a considerable role in the global container freight index increasing approximately 50% in a single week.
Apparently, part of the surcharge was not included in the past index version, which is a matter of baseline difference. The higher rates are also a response and possible interference to China-US trade. Trade between the two nations reached $404.6 billion over the first seven months of 2021, representing a 28.9% increase year-on-year.
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