Mon, 02 Aug 2021

  • Soaring demand, a shortage of containers, saturated ports and too few ships and dock workers, have contributed to the squeeze on transportation capacity on every freight path. Recent Covid outbreaks in Asian export hubs like China have made matters worse.
  • The pain is most acutely felt on longer-distance routes, making shipping from Shanghai to Rotterdam 67% more expensive than to the US West Coast, for instance.

  • Although still seen as a relatively minor input, HSBC Holdings Plc estimates that a 205% increase in container shipping costs over the past year could raise euro-area producer prices by as much as 2%.

The skyrocketing price of shipping goods across the globe may hit your pocketbook sooner than you think -- from that cup of coffee you get each morning to the toys you were thinking of buying your kids.

Transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam now costs a record $10,522, a whopping 547% higher than the seasonal average over the last five years, according to Drewry Shipping. With upwards of 80% of all goods trade transported by sea, freight-cost surges are threatening to boost the price of everything from toys, furniture and car parts to coffee, sugar and anchovies, compounding concerns in global markets already bracing for accelerating inflation.

"In 40 years in toy retailing I have never known such challenging conditions from the point of view of pricing," Gary Grant, the founder and executive chairman of the UK toy shop The Entertainer, said in a interview. He has had to stop importing giant teddy bears from China because their retail price would have had to double to add in higher freight costs. "Will this have an impact on retail prices? My answer has to be yes."

A confluence of factors -- soaring demand, a shortage of containers, saturated ports and too few ships and dock workers -- have contributed to the squeeze on transportation capacity on every freight path. Recent Covid outbreaks in Asian export hubs like China have made matters worse. The pain is most acutely felt on longer-distance routes, making shipping from Shanghai to Rotterdam 67% more expensive than to the US West Coast, for instance.

"These costs are already being passed to consumers," he said.

Europe Insight: What 400% on Asia shipping means for inflation

"The longer these extreme shipping freight rates last, the more companies will take structural measures to shorten their supply chains," Damas said. "Few companies can absorb a 15% increase in total delivered costs for internationally traded products."

With the end of lockdowns consumer demand is likely to shift to services from goods, but "the risk of course is that higher shipping costs persist -- especially given ongoing shipping disruption -- and that producers become more willing to pass these higher costs on to consumers," Rajanayagam said.

Source: News24

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