Rising freight rates continue to hit businesses
A few weeks ago we talked in our blog about the rising shipping costs in maritime transport that has been evident this year. We wanted to follow up on what is happening after the summer and how it is affecting companies’ day-to-day business. To do so, we have gathered the testimony of Judith Salgado, an expert in international logistics of Grupo Cobra, who has offered us her point of view on the situation.
Have you noticed an increase in maritime transport prices in the last year?
Absolutely yes. For any professional involved in the supply sector, whether buyer, seller or logistician, the price increases that have taken place since 2020 have not been indifferent. Specifically in my case, the prices that we were handling in Q4 2019 have increased by more than 300% during 2020, reaching an increase of 1000% in 2021 for containers with a Chinese port of origin.
As a logistics expert, what is causing this situation?
During the toughest stage of COVID, when much of the world suffered from strict confinement, international trade dropped significantly and shipping lines decided to eliminate departures from their ships. However, once demand reached pre-COVID levels and even increased, shipping lines responded with a more limited supply, and have continued to cut back on sailings. This coupled with the COVID protocols that have been implemented in the ports have slowed the flow of container returns causing equipment shortages and a major bottleneck.
Are there noticeable delays in maritime transports?
Yes, cargo is piling up, there are no containers and there is a lot of congestion which means that departures can be delayed by as much as two months. Cargo that does not go directly to its destination and is unloaded in a transhipment is left waiting for weeks for a free ship.
In addition to all this, there are the closures of ports by COVID, for example Yantian months ago and recently Nibgbo.
How do you think this situation will affect your sector?
In my case, as I am in charge of providing cost forecasts for tenders and I close logistics prices a year or two ahead for projects that have already been awarded, it has turned our procedures upside down.
On the one hand, it is impossible to have a cost forecast because no one offers you such a long term but only 3 weeks ahead, which leads to a great instability of the budget.
On the other hand, this congestion creates great uncertainty as to when your cargo will be shipped, whether you will get the equipment you ordered or whether at the last minute they will reject it and it will be grounded. You can imagine what it means if the goods don’t arrive at their destination. If the material does not arrive, the rest of the chain is waiting without being able to do its job.
On several occasions I have come across transport companies refusing to ship special cargo because it means more work for them when they are making a lot of money with general cargo.
Do you think that this situation will be sustained over time or is it temporary?
I am confident that it is a temporary situation because it is unsustainable, although predictions indicate that prices will go even higher.
When prices started to rise in 2020 we all waited until the summer to board as we naively expected it to go down, but it didn’t stabilise, it just kept rising to the current prices.