Shipping & Freight Cost Increases, Freight Capacity, and Shipping Container Shortage [2022]

Freight & Shipping Delays

With ongoing pandemic-related delays and closures, non-stop demand for ocean freight from Asia to the US, and a lack of capacity, ocean rates are still very elevated and transit times volatile.

Following a fall in rates at the beginning of November when peak shipping season ended, transpacific ocean rates have been more stable.

Despite this stabilizing trend, rates remain extremely elevated at 8-9X the pre-pandemic norm.

Furthermore, easing prices are not being driven by any significant reduction of port congestion.

Continued disrupted schedules and port congestion, combined with omicron slow downs and Lunar New Year, mean that importers have yet to see any improvement in shipping conditions in 2022.

Ocean freight rate increases and delays

Ocean rates on the major trade lanes remained stable this week but are still extremely elevated.

Manufacturing in China is expected to slow down significantly over the Lunar New Year (LNY) holiday at the start of February, with shipping prices going up ahead of the holiday.

Plus, China’s “Zero COVID” policy is starting to impact operations at the major port of Ningbo.

Area closures and restrictions to contain the spread in the region are limiting truck access to the port, with reports of some warehouse closures as well. The recent increase in cases could limit manufacturing in areas with outbreaks, but broader travel restrictions could also mean factories that normally close over the Lunar New Year (LNY) holiday will stay open, reducing the typical pre-holiday pressure on logistics.

Ningbo’s counterparts across the ocean, the ports of LA/Long Beach, continue to struggle with congestion, and are facing a virus-driven challenge of their own.

As omicron surges in southern California, more and more of the ports’ labor force has tested positive and authorities are bracing for a slowdown in operations.

Freight rates are expected to climb as LNY approaches and any additional slow down due to COVID will likely exacerbate the congestion and backlog, causing higher container rates. These are container freight rates for the first week of January 2022 according to the Freightos Baltic Index:

• Global freight rates decreased 5% to $8,917 which is still 140% higher than this time last year
• Asia – US West Coast rates decreased 14% to $12,524 which is still 218% higher than this time last year
• Asia – US East Coast container rates stayed basically the same as the last week of 2021 at $16,495, which is 232% more expensive than last year
• Asia – North Europe container shipping rates also remained level, decreasing 2% to $14,240, nearly double last year’s rate
• North Europe – US East Coast rates decreased 10% to $6,230, however this is nearly 240% higher than December 2021