During the past pandemic year, a new factor, impacting the supply chain appeared. It is affecting exporter and importer’s business, requiring them to adapt, whenever it’s possible.
The phenomena does not have any nationality, it’s global: the freight.
Sea freight represents 80% of international goods transport. If you are in the business, you should have noticed the freight situation is ‘different”. Freight cost has increased of 500% compared to previous year.
In fact, Covid-19 policies has led to many issues affecting freight and international trades such as more controls at port, unpredictable restrictions, infected workers, etc.
In the meantime, consumers have changed their consumption habits as E-commerce businesses are booming because of lockdowns and curfews.
These 2 factors mentioned above justifies a major increase of freight cost.
The containers blocked at port because of higher controls / spontaneous restrictions take more time to return and next shipments are delayed. At the same time, by spending too much time at port, goods can expire.
For example, Vietnamese mangoes have a 35 days shelf life. Initially, it takes 25 days to ship, so importers have 10 days remaining to sell and distribute. With delays, shipment lasts now 30 to 35 days. Importers cannot take the risk to buy mangoes that will arrived expired. At the same time, sellers cannot support additional charge due to freight issues in order to keep profits.
A lot of countries are closing their borders, reducing and increasing the truck transport time.
The high risk of infections impacts port’s labor force. Less workers can operate at port, increasing the loading / unloading time and all import / export processes.
Growing demand for E-commerce leads to trade deficit between countries.
China is facing a huge increase of exportation. For 3 containers sent to Los Angeles from China, only one 1 is sent from LA to China. Moreover, China tends to export high valued goods compared to the value of their imports. It means China will prefer return empty containers, rather than optimize container return way by loading low valued products like agricultural items.
Air freight, obviously suffers from the global situation, the second-best transport mode registered an increase up to 3 to 4 times the price it was the previous year.
The air freight between Vietnam and Singapore used to be around 2 $ per kilo to ship, now it’s getting closer to 6 $.
The conclusion is that the competitiveness of small companies is reducing as competition is becoming unfair. Only big structured companies can still supply shipments and keep making profits.
Experts forecast freight situation will keep deteriorating.
To anticipate additional costs, it is highly recommended to book and secure shipments for Western markets as soon as possible.
September is coming soon, following by Christmas periods, it will be too late to find suitable supplies at reasonable costs.
The final consumer is threatened by price inflation and shortage of some goods. Once he will reach his limit, the final customer will look for other alternatives.