When importing goods from China, shipping is one of the most important aspects of the process. However, shipping can also be expensive, which can add to the total cost of doing business. This blog post will examine why shipping is so expensive, why shipping has gotten so expensive, why freight costs are so high right now, and how you can avoid paying too much for shipping services. Keep Reading to learn more!
Reasons why shipping is so expensive in 2022
Shipping is expensive. In 2022, it’s estimated that shipping will cost approximately $17.6 trillion. While the reasons for these higher prices are many and varied, here are four of the most important factors why container rates are so high in 2022.
The Suez Canal Accident Had a Significant Impact
The Ever Given ship was stuck in the Suez Channel in March 2021 and had to block the entire canal for one day. It’s a tragic event that pushes up shipping costs. 12 percent of the world’s trade passes through this canal, which caused a massive delay in international trade.
Although the canal no longer has been blocked, it was causing delays for ships heading to their destination. Ports face delays in the mooring and transport of cargo ships, a problem that has increased freight costs and caused delays.
New COVID threats at China’s major ports are causing additional delays.
Although the pandemic seems to have receded in most parts of the world, COVID variants have caused new batches of lockdowns in some regions of China.
For example, the Delta variant has been reported with hundreds of people infected. Unfortunately, areas like Guangdong, which handle a huge percentage of Chinese exports, are the most affected. This has therefore led to a longer waiting time for goods to be shipped and a long backlog of unshipped goods.
As a result, this reduced supply has dramatically increased the shipping charges for the few shipping carriers that manage to transport freight.
Increased consumer demand
Since the pandemic, more customers than ever have opted to buy goods on eCommerce platforms and online marketplaces. Almost anything can be purchased online nowadays, leading to a huge demand for goods that has disrupted the global supply chain.
This large demand means many products must be shipped in bulk, but the shipping carriers remain the same. There is, therefore, a high increase in demand but no increase in supply. As a result, suppliers have had to increase costs to cater to the increased stress and increased shipping charges they incur when shipping goods.
Shipping Container Shortage
China experienced the COVID pandemic before other parts of the world. As a result, China ended the lockdown and opened up its economy before other parts of the world.
However, most shipping containers were stuck in Europe and US because there was a restriction on movement. The remaining containers were stuck in China, where many suppliers had to keep their goods inside them since they couldn’t be shipped yet. Therefore, shipping containers are being spread thinner across competing supply chains.
This led to a worldwide shipping container shortage. As demand for consumer goods began to rise, there was a high premium on the limited containers available for shipping. As a result, market prices for new containers have increased to over $3500 per CEU (cost equivalent unit) from $1800 per CEU at the start of 2020. Because of the greater demand and decreased certainty regarding shipping times, costs, and loads, there was a massive increase in freight rates.
How can companies reduce shipping costs?
While the cost of shipping has greatly skyrocketed since the advent of the pandemic, there are steps businesses can take to avoid or reduce these shipping costs. Some of them are:
Personally deliver goods when possible.
Consider choosing in-house or self-delivery of your products if you have nearby manufacturing facilities or if your customers are close to your manufacturing location.
Although setting up your own delivery infrastructure requires more money upfront, in-house delivery is more cost-effective in the long run because you are not subject to changes in transportation costs. This prevents businesses from being at the mercy of shipping carriers and logistics companies because they can arrange and personally deliver their goods.
However, this works best when the customers are close enough to the manufacturing location.
Consider other manufacturing locations.
China is the world’s manufacturing powerhouse because of its cheap production and labor costs. However, since shipping from China has become very expensive, it’s time to consider other strong manufacturing countries with cheap labor costs and much cheaper shipping costs. Companies shouldn’t rely solely on one nation for their manufacturing requirements. They should instead relocate their manufacturing facilities to reduce risk. An excellent example of such a country is Vietnam, where labor wages are half those of China.
Use air freight for a faster option.
Air freight has always been regarded as an expensive mode of shipping. However, air freight might be a more cost-effective shipping option currently for companies, given the exorbitant shipping rates of Ocean freight. Add to it the fact that air freight is much faster than ocean shipping, and the scales are tipped very much in favor of air freight.
Although you might not save much money using this shipping method, your goods will arrive much sooner, allowing you to serve your customers more efficiently. With these benefits, it’s easy to see why companies should consider air freight as a more lucrative option.
How do you avoid expensive shipping?
We know that freight prices and international shipping rates influence our purchase costs. Whether you choose Air freight or Ocean freight, the higher costs of cargo ships, the higher the unit price of your sales item, So it is important for you to control the freight costs. Here are some suggestions to help you cut shipping costs.
Reduce shipping distances.
Weigh the boxes and cut the dimensions.
Find discount products.
Purchase with discounted shipping rates!
See the offer of your platform.
Buy cargo Insurance for the shipments.
Cooperate with reliable shipping companies.
Frequently Asked Questions About Why Is Shipping So Expensive?
Here are some other questions about why shipping freight is so expensive. Welcome to check below. If you have the same question, you can get the answer now.
Why shipping is so expensive in 2021?
Shipping is expected to get more costly in 2021 because of a lack of containers, unanticipated delays, and unreliable cargo processes. The lack of shipping containers primarily occurred due to millions of empty containers in Europe and the United States awaiting their return to China. The most recent delay was a ship dragged through the Suez Canal in Egypt. It happened in March 2020, and the company spent nearly $ 9 billion on the incident. The canal involved about 10% of global trade and affected thousands of people.
Why is shipping so expensive now?
Why is container shipping so expensive now? Almost all Chinese ships have been affected by the global shipping container shortage. US-EU shipments were subject to severe COVID controls while thousands delayed China’s opening. Inefficient cargo ships are also becoming an issue. The United States imports high quantities of goods with limited dock space, which means many shippers must wait days to process the products they are importing.
Why is 2022 shipping so expensive?
The main cause of increasing numbers is the world’s greatest nemesis, COVID-19. Since 2020 pandemics have destroyed supply chains worldwide. And rising shipping costs reflect this directly.
Why is shipping so expensive lately?
The COVID-19 pandemic impacted the supply chain and caused shipment costs to climb exponentially.
Will shipping prices go down in 2022?
Will international freight rates go down in 2022? This isn’t easy to predict, as shipping rates are often determined by various factors, including fuel prices and the cost of labor, and the charges paid to the shipping companies. However, it is possible that shipping prices could decrease in 2022 as the influence of COVID-19 is becoming smaller and smaller. This could allow businesses to ship goods more efficiently and at a lower cost.
Will shipping prices go down in 2023?
There is no definite answer, but shipping prices will likely continue to drop in the next few years. This is because many companies are now offering free shipping on orders over a certain amount, which is likely to continue as more and more companies compete for customers.
Additionally, many shipping startups are focused on delivering affordable and fast shipping services. So while it is difficult to say for certain what will happen in 2023, it is likely that shipping prices will continue to drop.
