Increased Freight Rates & Container Crisis
INCREASED FREIGHT RATES AND CONTAINER CRISIS
Over the past 19 months, LOFA has constantly been reporting on the operational issues faced by its members and the industry as a whole. We were hoping these issues would have lessened and we could have gained some respite however, it seems that these problems are now escalating even further.
LOFA can report that there is yet another increase in freight rates being levied at our industry, and the new FAK* rates from Asia to North Europe are now edging towards $20,000 per 40ft container, this represents a massive 1566% increase in the space of 19 months.
These increased rates will of course have a major impact on importers, retailers, and consumers. Retailers will not be able to sell stock if the retail prices have to be increased due to the jump in these shipping costs. Importers will find themselves trapped, having to pay 16 times more for freight than last year and it would not be unlikely to expect some companies to flounder in 2022 if this situation is not resolved.
Considering many of our members have to bring in 50 plus containers in a season this is a huge amount of extra funding they are having to generate.
2021 - 50 containers @ $20,000 per 40ft Container $1,000,000
2019 - 50 containers @ $1200 per 40ft Container $ 60,000
Extra funding $ 940,000
LOFA members have tried to absorb these costs where they can, to assist their customers, but this will no longer be possible with such a massive increase.
The whole market is in bedlam and there are many defining factors causing this issue, price increases aside.
- Finding empty containers is exceedingly difficult.
- Factories are producing products but are running out of storage space because there are no free containers to load the products onto.
- There is a new outbreak of Covid which is affecting the southern China Ports where there were reported to be up to 40 vessels waiting to berth last week.
- The availability of containers at these southern Chinese ports continues to deteriorate as carriers omit calls due to a wave of Covid outbreaks in the Guangzhou province. According to the latest data from Container xChange, the ports of Yantian, Shekou, and Nansha have been the worst hit by container shortages.
- There are far fewer empty containers arriving back to southern China as container lines skip calls, and many shippers face long delays or higher prices for equipment if these affected ports can’t be avoided.
- At the moment there are 5 million containers currently in the wrong position in the world and 40% fewer vessels for June as a result of the Suez Canal issues.
- When products eventually arrive in the UK there is now an issue with moving goods that have docked and cleared from the quay as inland haulage rates have reached new and unexpected heights.
Is it the shipping lines that have colluded together and seized this opportunity to increase prices whilst the demand is strong and are now reaping the benefits for no other reason than they can? Distributors, retailers, and consumers are now all paying excessively for this short-term profit gain, in real terms has Brexit, Covid and the high demand helped them to get away with their greed, and are they in effect operating as a cartel? Is there too much control in the hands of the shipping lines?
In light of these ongoing difficulties LOFA has lobbied the Department of International Trade, the Home Office, local government and has also reported this price-fixing by the larger freight firms to the Competition and Markets Authority, this report is now with the CMA legal team who are deliberating on a decision. LOFA is hoping this will lead to a full investigation.
*FAK is an acronym used in the shipping industry that stands for Freight All Kinds. According to globalnegotiator.com, they are rates applicable to all types of goods and not restricted to any particular commodity.