The shipping industry was one of the hardest-hit COVID-19 pandemic and effected global trade to a great extent. There were numerous knock-on-effects within the global shipping and trade industries, and the latest is the ocean shipping rate hike.
The most common reason for the ocean shipping rate hike is attributed to the shipping delays caused by COVID-19 affected areas, with social distancing and labour shortages. Other reasons include saturated ports with delays in clearing them through customs and procedures, and not to mention not having enough ships, dockworkers or trucks to facilitate movement. These ocean shipping rate hikes are not just local, but global with different countries hit hard in different ways, but with the constant of a hike in rates.
Further, the ongoing pandemic has also skyrocketed competition along with the costs due to demand in terms of ocean freight capacity. Without any sign of slowing down, the ocean shipping rate hike is expected to continue and experts say that they may not be able to normalize them to levels before the pandemic either in the long term.
The ocean shipping rate hike was first noticed in August of 2020, one year ago, and has since continued to rise with no short-term relief and spikes in rates across different freight categories such as dry bulk and containers. In certain trade lanes, there have been ocean shipping rate hikes that are three-fold, much to the display of global traders. With lockdowns brought on by the Delta variant of COVID-19 and the imbalance in terms of what is restricted and what isn’t, there are various imbalance that have had knock on impacts. Shortages of empty containers and imbalance capacity are also to be faulted with this trend, especially when there are no alternatives to ocean shipping. There is talk of blank sailings to fix the empty container shortage that can level the playing field in terms of capacity constraints, but port congestions and closures is still ongoing.
Source: China Ministry of Transport, Harper Petersen & Co. and Baltic Exchange via Macrobond, ING | Year on year growth in freight rate indices, 2018 – May 2021
With these different factors in mind, the ocean shipping rate hike is expected to cause a knock-on effect and will impact the Christmas season as traders race to stock their stores. Experts further state that though capacity increases can reduce price pressures, these can only be expected around the year 2023 as global industries will have low recovery with the pandemic not easing. With the ocean shipping rate hike coming at an unpredicat3end and volatile tile, many retailers in Australia and the world have had to increase prices which has induced inflation in many countries.