Coronavirus & Shipping: Air and Ocean Freight Delays, Rates & Cost Increases

Non-stop demand for ocean freight from Asia to the US continues to overwhelm major US ports, keeping ships waiting outside several major West Coast ports and driving air cargo rates up as importers seek alternatives. 

And when conditions were starting to improve from Asia to the Mediterranean and Europe, an Evergreen container ship ran aground in the Suez Canal, blocking traffic in both directions. While the huge boat was liberated, global trade began to feel the hit on both capacity and pricing. It will likely take months to recover completely.

Finally, with retailers still struggling to keep inventory levels up and already to look to get a leg up on peak season, there may be no relief from high costs, long delays, and equipment shortages.

Ocean freight rate increases and delays

Asia to both US East and West coasts are still experiencing very high volumes and port congestion, pushing factory-to-door delivery times to an average of nine weeks compared to four to five.  

Though Asia-US West Coast rates haven’t climbed this week, congestion is still a problem, with more than 20 ships now waiting outside Long Beach and Oakland ports.

There is likely no significant easing of demand from Asia to the US before the peak season starts in July as retailers hustle to restock inventory and keep up with solid sales.

Other importers are placing peak season orders early to avoid being caught without back-to-school and other seasonal inventories. The National Retail Federation expects import volumes to be 14% higher this month than in April 2019 and stay elevated before climbing again this summer. 

In Suez news, releasing the Ever Given may have opened up the lane to other carrier vessels, but the damage was already done.

Two weeks post the blockage; global trade is beginning to feel the hit on both capacity and pricing. Some carriers are warning that critical congestion at important ports will result in delays, equipment shortages, and cancelled sailings.

Plus, freight rates have already begun to rise on some lanes, with Asia-US East Coast rates now 8% higher than at the blockage time. 

Transatlantic rates have increased 53% this month to a multi-year high of $3,357/FEU.

As congestion continues to impact empty container availability in Europe and carriers are cancelled sailings, prices aren’t likely to stabilize soon. 

Airfreight delays and cost increases

Expensive and unreliable ocean freight is pushing shippers to air cargo. Healthy demand has pushed global air cargo volumes back to pre-COVID levels.

Rising fuel costs are putting additional pressure on prices.

High volumes combined with still-limited capacity from passenger jets and fuel prices are likely to keep rates elevated for some time.

Amazon shipping in 2021

With a 60% annual increase in sales by third-party sellers on Amazon’s marketplace last year, the boom in e-commerce continues in 2021.

Keeping up with door to door pricing for Amazon FBA shipping can be a hassle.

How to navigate the current freight market:

• Compare at least a few quotes and modes to ensure you are getting the best cost and most efficient service possible.
• Buffer your freight budget and transit time for changes. Costs due to unforeseen delays or limited capacity can arise, so be prepared.
• Explore warehousing options to mitigate the effects of lowered demand and business restrictions.
• Pay attention to the profitability of your goods and consider if a pivot could be worthwhile. Additionally, remember to factor in freight costs when assessing profitability. 
• Understand that delays and extra charges may arise. Freight forwarders are trying their best to move goods on schedule without additional fees, but delays and additional costs can occur out of forwarders’ control in this unstable period. 
• Consider which shipping mode is best for you right now. As during non-pandemic times, ocean freight is typically far cheaper but has a significant lead time. If your transit time demands it, ship by ROAD, and you’ll have confidence in the transit times. 
• Book now if you can.  
• Ship closer to your goods’ ready date to avoid rate changes. With the current shipping climate, booking too far in advance may mean rates change before your goods are ready. 
• Communicate regularly with your freight forwarder. This is more important than ever – staying in touch means you’ll have a better handle on your transit time and stay on top of any changes that may arise. 
• Make sure that you have the workforce to accept your goods at arrival. This will minimize delays.