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International Forwarding Association Blog » News » Shipping Rates Set to Skyrocket due to New Outbreak in China
Supply Chain Disruptions

Shipping Rates Set to Skyrocket due to New Outbreak in China

The freight transport industry has suffered significant supply chain disruptions due to the ongoing global health crisis. Intermodal transport in Europe, including truck carriers and railroad shippers, has been affected. Ports around the world have seen a reduction in cargo volumes due to uncertainty. Parcel delivery companies have been the least affected as they face less competition from cargo transported by air. Now due to a new outbreak in China, a shipping crisis is looming.

Effect of Supply Chain Disruptions before the New Outbreak in China

Disruptions are set to continue throughout 2021, possibly resulting in Christmas shortages. The industry has been struggling to cope with the containment measures in place to curb further spread. Fluctuations in supply and demand and travel restrictions have tested the shipping industry. The Suez Canal blockage has dealt a further blow on global trade, blocking an estimated $9.6 billion of cargo.

On March 28 alone, over 369 vessels were queueing to pass through. With the Suez Canal finally reopening, the large volume of delayed vessels passing through caused congestions at ports around Europe, including Antwerp and Rotterdam. Taken together, these factors increase the likelihood of shortages during the Christmas holiday period. This is bad news for consumers and retailers alike.

 

New Shipping Crisis Looming

 

New Shipping Crisis Looming

With a new coronavirus outbreak in Southern China, the logistics industry is preparing for another shipping crisis. Disruptions occurring in Guangzhou and Shenzhen are significant. Waiting times for ships queuing at Shenzhen’s Yantian International Container Terminal have increased from 0.5 to 16 days. The major disruption of port services results in delivery delays and higher shipping costs.

As the Guangdong province faces a significant upsurge in cases, the authorities imposed lockdowns and business closures to prevent further spread. The shipping industry is in uncharted waters given that cargo volumes transported from Guangdong make for 24 percent of China’s exports. The Shenzhen and Guangzhou ports are the world’s fifth and third largest by container volume.

As states began to reopen in late 2020, the world was faced with a buying boom and a resulting shortage of containers. This resulted in significant delays in transporting cargo from China to the U.S. and Europe and prize hikes for both consumers and businesses. The risk of significant global supply chain disruption increases, and shipping costs and export prices are likely to increase further. That is because Guangdong’s ports play a major role in global trade. The U.S. will be the worst hit given that most shipments are designated for North America. Consumers will be faced with shortages when it comes to most products made in Asia along with price hikes due to shipping costs being at all-time highs. Quotes are currently up to 10 times the historical averages, and experts can’t tell where they will peak. They warn, however, that shipping rates are fluctuating widely and recommend that forwarders increase their budgets twofold as it is unclear what is going to happen.