Prices of Commodities Increase with Surge in Shipping Costs

To what extent can one transport cargo inside a shipping container? The answer might stump you. You sure have heard that shipping containers transport a large variety of goods daily. Shipping containers are the backbone of the global supply chain. This is because the world is dependent on them to store as well as transport goods.

Do you recall how so many things are manufactured in a country on a different continent? These goods reach us without any problems. All thanks to different types of shipping containers that make transportation so feasible. There are many different cargo dimensions that are available to transport different sizes of cargo.

What is the challenge faced by shippers in the current scenario?

The shipping container industry has been facing a monstrous challenge ever since the advent of the Covid-19 Pandemic last year. The world was brought to a standstill as there were lockdown conditions in almost every country in the world. This impacted the global supply chains as there was a major decline in transportation of goods in shipping containers.

However, during the third quarter of 2020, the economic activities recovered promptly on a worldwide level. The situation alleviated in many parts of the world due to the ease in the pandemic situation. Associated containment measures that were deployed for the protection of the public were also eased.

We can conclude that the second half of 2020 did pretty well as anticipated by economists. This was mainly due to the increased demand for goods which eventually resulted in increased levels of production. The global imports also started to recover sometime in the latter half of 2020.

Some alarming numerical data throws light on the surge in container shipping prices. The cost of shipping a 40ft shipping container from Asia to Europe increased to more than $10,000. The cost of shipping a container from China to Europe surpassed $US 10,000 to more than US $14,000. Something like this happened for the first time in history. This was a rise of more than 500 percent since June last year.

The prices of commodities that we use on a daily basis suddenly escalated. Commodities like coffee, sugar, car parts, steel, faced an increase in prices as economies are recovering from the pandemic.

“In 40 years I have never known such challenging conditions from the view of pricing,” said Gary Grant. He is the founder and executive chairman of a U.K. retail toy shop. He had to stop importing toys from China because their retail price would have doubled in higher freight costs. “Will this have an impact on retail prices? My answer has to be yes.”

Reasons for the Increase in Prices of Goods

The outbreak of the Covid-19 Pandemic

The Coronavirus outbreak caused chaos in severely affected countries of the world. This resulted in major losses as the transportation and import-export activities were on hold. This also resulted in a decline in the orders from suppliers from countries having high production levels.

In the last quarter of 2020, the order volumes and transshipments shot up. This happened once the situation started to ease and the economies started taking measures in catching up. This sudden increase in demand caused a shortage of supply. And resulted in delivery delays and congestions in the major supply chains of the world.

Diminished supply and demand

Due to the lessened interest in transportation services, the supply from the maritime owners has also decreased. As a result, the shipping vessels had to stay in the docks for some time. Another facet of this situation is the reduced demand for imported goods in China. It has resulted in a shortage of empty cargo containers between Europe, China, and the USA.

Lack of alternatives to ocean shipping

It is extremely tough to avoid the surging transportation costs as per the current scenario. If the situation was any better, alternative modes of shipping would be an option. The spike in tariffs is due to the capacity limitations for shipping via rail or road. This increase in margin prices will impact the consumers by changes in pricing or product availability.

Delay in shipments due to port congestion and closures

There are many other issues apart from the existing problems that are worsening the situation for shipping companies. The urgency in the delivery of cargo shipments has caused traffic jams in container ports all over the world. Port congestion in China and other countries has increased the demand for new and used shipping containers. This resulted in increasing the prices of cargo units.

Conclusion

There is still an unpredictable state of the pandemic and its impact on countries all over the world. It is still difficult to say how long it will take for the situation to go back to normalcy. But, we have proven time and again that dedication and resilience can help cope in emergencies.