A Look At Record High Freight Costs

We’ve talked about it time and time again during the past 24 months: relying on shipping from overseas has been a rocky road.

There are lots of businesses that depend on overseas shipping, and many of them deal directly with the cost of freight and have faced a variety of setbacks. But why are freight costs at a high right now? Do we think they’ll settle down to a regular rate soon?

Today we’ll take a look at this, as well as the a multitude of demanding challenges importers are facing with this issue. Read on for more information.

The pandemic

It’s plain to see that the pandemic has shifted a lot of things in our economy and an equal amount of things within the global trade community. There were lots of lockdowns and constraints, which end up drove up demand for goods quite a bit, while slowing down production times. Not only that, but port scheduling, equipment shortages and congestion all contributed to the issues here.

Chinese New Year

During the Chinese New Year, labor based in China stalls. And because of that, supply is outweighed heavily by demand for goods manufactured in China. This happened in 2021 and we can expect some issues related to that headed into this year too. Importers should take this into consideration as much as possible. 

Weather conditions

Last year, adverse weather conditions proved to be problematic. This was so much so that there were many ports that had to be closed due to a typhoon. And on top of that, railways weren’t working optimally, so pressure for goods movement fell onto freight, where possible.

Trucker turnaround time

Many things, like a shortage of equipment or employees, to port congestion brought problems that ended up looking like many trucks having to spend a lot more time waiting in the port. Needless to say, this scenario is frustrating,  because goods are there, ready to ship, yet they can’t due to the congestion issues. 

Port congestion

There’s always a proper interval between vessels coming and going. The problem is that only a limited number of shipments can be processed at once, and because of that there’s a bottleneck which prevents things from going smoothly. Normally congestion should not happen to such a notable degree, but last year was certainly challenging.

Run pools

There are a lot of shipment rollovers, which end up generating a lot of run pools. These are increasing shipping times and at the same time the freight costs are higher too. Some say that ports are actually boosting rollover artificially with the idea of giving space to the highest bidder. Of course ports deny this, but many still believe it’s purposefully made to boost costs and monetize the situation.

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Many of these things add up to increase the freight costs to some of the highest levels we’ve seen. It’s important to note that there’s no way to know how things will shake out 2022, but we can expect some issues like this (demand, shortages and also the pandemic) to contribute to costs.

Ensuring that your bottom line is still in the green might be tricky during these times, but working with a customs broker can ensure that you are taking advantage of regulations, like free trade agreements, and clearing customs with ease. Click here to start the conversation.