The cost of shipping a container full of goods from China to Europe has increased over 700% in the last 12 months as pandemic-related imbalances in global supply and demand skew supply chain prices and threaten to significantly disrupt retail prices in 2021.

When CurrencyFair last reported on the disruption caused by shipping container shortages in December 2020, prices had more than tripled to US$5,000 compared to US$1,300 in March 2020.

However, since Christmas prices have skyrocketed with some companies reporting quotes of up to US$14,000 (£10,000) to hire a 40ft container.

In the UK one business woman, Helen White, of lighting importer Houseof.com, told the BBC at the end of January:

“We were paying £1,600 per container in November, this month we've been quoted over £10,000”.

She also said she was taking a loss on sales to avoid passing on costs.

Unsurprisingly, some retailers are warning this is unsustainable and prices in the UK and Europe are likely to rise to help offset these increased costs.

James Owen, owner of Outdoor Toys, was interviewed on BBC 5 Live and told them the price of large toys such as swings, trampolines and climbing frames could soar by 40-50%. “For the first time ever, the ocean freight outweighs the cost of the item," he said. “We can't get space out of China, there's a container shortage. Hauliers are really stretched, rates keep climbing."

Structural problems persist

The fundamental issue continues to be the global supply and demand imbalance with too few containers in Asia and too many empty containers clogging up ports around the world, no more so than in the UK where Brexit has caused additional challenges.

Over half of UK companies importing or exporting goods through the EU border experienced delays in January according to the Chartered Institute of Procurement & Supply. This was mainly due to the requirement for increased post-Brexit paperwork.

Additionally almost one-quarter of supply chain managers in the UK believe they will run low on stock in Q1 unless the situation improves.

On the other side of the world, the supply crunch has been compounded by a new outbreak of coronavirus in China which has led to a slew of additional restrictions and a testing regime which includes testing frozen fish. This has resulted in a large backlog of containers in the port of Dalian, as electricity points required to power the chilled ‘reefer’ (refrigerated) containers are in increasingly short supply.

Green shoots of optimism

However as spring begins to make its presence felt in the northern hemisphere there are a few green shoots of optimism in the shipping container sector as well.

A survey of UK ports by the British Ports Association has found that two-thirds said they felt “somewhat confident” about the business outlook for 2021, with one-third saying they felt “not so confident”.

The ports were asked to summarise their outlook for 2021. The most commonly used description was “challenge”, followed by “uncertain”, with “difficult” proving popular as well.

Overall 87% report that the pandemic has had a negative impact on customer activity. Among the other chief concerns for 2021 were the overall status of the economy, operational challenges posed by the pandemic, Brexit, and decreased revenue. However, descriptors of optimism were also well evidenced, with words such as ‘positive’, ‘hope’ and ‘opportunity’ mentioned frequently.

Positive trend for shippers seen

Elsewhere the Container Availability Index, developed by Container xChange, has adopted a bullish stance on the shortage, indicating it believes Chinese New Year in mid-February will herald a shift towards a positive trend in container availability which could potentially ease pressure on prices.

The index is showing a return to normal levels in major ports across China including Shanghai as well as Singapore where container availability is up 58% in January and Port Klang, Malaysia where there is 54% growth in availability.

David Amezquita, Head of Data Insights at Container xChange, said: “In January compared to December 2020, the Container Availability Index finally shows a positive trend for shippers and forwarders.”

Uncertainty brings cost saving opportunities

While the current volatile trends in the shipping container market are expected to continue for the short-term at least, CurrencyFair offers a quick, low-cost way for businesses in the supply chain to exchange foreign currency and pay overseas suppliers with substantial savings to be made over using a bank.

Businesses can send money in to their CurrencyFair account in 17 currencies and exchange into 22 currencies including Thai Baht, Indonesian Rupiah, Indian Rupee, Singapore Dollar, Hong Kong Dollar, and Philippine Peso.

Businesses can securely send money to over 150 countries. CurrencyFair is fully licensed and regulated, with a 10-year track record of best-in-class service.

CurrencyFair’s Business Team works with business customers who are exposed to currency fluctuations, offering highly competitive rates.

Sign up for a CurrencyFair Business account to get the best business rates today.

Sources:

https://www.hellenicshippingnews.com/shipping-costs-from-china-to-europe-soar-amid-container-shortage/

https://www.bbc.com/news/business-55740063

https://www.bbc.com/news/business-55702243

https://www.ft.com/content/d45db971-caea-4524-aef3-b62aced20555

https://www.channelnewsasia.com/news/business/china-covid-19-chinese-new-year-air-travel-peak-season-14043752

https://finance.yahoo.com/news/frozen-fish-pileup-china-ripples-210000840.html

https://www.britishports.org.uk/news/things-can-only-get-better-ports-survey-reflects-mood-of-tentative-optimism-for-2021

https://maritime-executive.com/article/container-shortage-is-easing-with-chinese-new-year-as-turning-point