- The headlines are full of news about how freight prices are becoming more difficult for logistics professionals and people in similar positions to manage.
- In many cases, there are knock-on effects for consumers who realize the things they used to buy regularly without issue are becoming progressively less affordable.
- The rising container prices put extra strain on company representatives who notice how the ballooning costs impact shipping rates.
A recent news article published in the Global Trade talks a about how will rising freight and container prices impact shipping rates?
Here is a closer look at this complex situation.
The Situation Will Impact Shipping Rates for the Long Term
People anxiously hoping for some relief from the current state of freight prices are probably out of luck. At least, that’s what the executives at numerous shipping companies expect. The specifics vary slightly in how long they think rising container prices will persist. However, the news isn’t good across the board.
One executive said people at his company anticipate this situation continuing until at least the first quarter of 2023. Another leader said people would have to get used to a new normal for the shipping industry, featuring more uncertainty, higher shipping costs and longer timeframes for goods in transit.
Some of the executives recommended charterers sign longer contracts with ship owners so the agreements would last longer. More specifically, they might stay valid for several years instead of remaining in effect for months. Agreeing to those extended contracts tackles the price volatility issue and helps logistics professionals rest assured regarding availability.
Numerous factors impact shipping rates and most are out of the direct control of the people they affect. However, some business leaders have responded to the matter by trying to do more business with local suppliers. When goods don’t have to travel as far and aren’t going across international borders, freight prices should be lower and it’s less likely the shipments will experience significant delays.
Logistics Professionals Will See Increased Freight Prices in Various Forms
Some people may get frustrated and feel there’s no rhyme or reason for the rising container prices. But, shipping companies have always based their rates on various factors. For example, courier rates are covering many of the least expensive parts of the shipping process. However, they can still represent a substantial amount when added together.
Many shipping providers also calculate export surcharges that customers must pay. After citing challenges associated with increasing costs for fuel, logistics and more, some have raised those by several hundred dollars.
People also must account for the overhead expenses that keep shipments moving from one stage to the next. Since multiple parties are often involved, the total costs can go up as executives from each company cope with their own progressively climbing prices.
The specific impact shipping rates have on business customers also depends on which methods those parties use to get the goods to their destination. Sea and air are the two main channels for international shipments. The rates for each option fluctuate frequently based on demand.
For example, when more customers want space on a ship, the rising container prices will mean people have to pay more to secure their spots. Those who can’t afford the growing costs will have no choice but to look for other options.
Some companies also charge lesser-known fees to seal or clean the containers customers use. However, as these rates increase, many providers post associated updates on their websites. Even though the information doesn’t negate the fact that freight prices went up, it gives customers time to adjust their budgets wherever possible, potentially mitigating some of the adverse effects.
Customers and Business Owners Alike Will Experience the Effects of Rising Container Prices
When people read about the current logistics landscape, it’s not always easy for them to grasp how the soaring freight prices will affect individual business owners and consumers. Most who purchase things at their favorite shops never think about rising container prices and may have a passing interest in what’s happening based on glancing at the day’s headlines. However, they’ll almost certainly notice the effects.
One thing to remember is the freight issues have already been disrupting timelines and budgets for months. Consider the experience of one seller of holiday goods. He said he paid as much as $22,000 per container during the 2021 holiday season. However, it was only $3,500 the year before that. When faced with such gigantic increases, many business decision-makers have no choice but to pass the costs onto consumers.
Inflation is a much-discussed topic these days and researchers found a direct link between inflation rates and freight prices. They took data from 143 countries while conducting the study. The results showed that when freight rates double, there is a 0.7 percentage rate increase in inflation.
When the researchers published the outcomes in March 2022, they concluded that the impact shipping rates have on inflation could result in an increase of about 1.5% throughout 2022.
They also noted that their research occurred before the Ukraine invasion but believed the issue would worsen global inflation. Various mainstream news outlets have also analyzed the ongoing supply chain issues. They found containers were often stuck at ports or quickly snatched up by the parties with the most financial resources to devote to the matter.
Some retailers also reprioritized what they sent through certain methods due to the rising container prices. For example, having soft items shipped often meant they could fit more per shipment.
Since some items take longer to arrive, customers also have to deal with the reality that they may not get the products in time for events like kids’ birthdays or religious holidays. The problem also affects manufacturers who need parts to build the most in-demand items.
Be as Transparent as Possible About Rising Freight Costs
It is now easier to see the impact shipping rates have on various parts of the supply chain. People familiar with the issue often warn there’s no end in sight.
If that’s the case, the best thing affected parties can do is try to control as many factors within their sphere of influence. Additionally, constant contact with customers about rate increases or delays will ensure everyone has the most accurate and up-to-date information.
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Source: Global Trade Mag