A commentary by Dr. John Jinkner at Rail Rate Advisors
A take on the rising cost of freight transportation
The looming storm is that shipping costs keep on rising despite carriers suspending the rate increases. According to a recent publication by global trade reviews, the freight rates for popular routes have risen by over 500%. As of September 16, the price of shipping a container from Shanghai to Rotterdam is up by a whopping 570% from the rate charged last year. The question remains why, and what should we expect in the future.
We must agree that post-pandemic economic recovery is not going to be easy. With most of the countries opening, demand for shipping services is on the rise. This is on top of the increasing demand for petroleum by companies planning to bounce back to the market.
Although the law of demand dictates that the rising shipping demand is leading to rising freight costs, companies like CMA CGM and Hapag- Loyd in view of to protecting their customers, have tried to carp their freight rates. Other shippers are also following the trail. So, in the coming months, we expect this trend to shift.
The supply of shipping providers is likely to increase due to many newcomers coming into the market. Additionally, the established companies are likely to reduce their charges even further to make the market tough for new entrants. On the other hand, the pandemic has highlighted the importance of local production a fact that will see many countries intensifying home production. This and many more factors will reduce demand for shipping leading to a subsequent decline in the cost of freights.
Are you concerned about the freight rates that you are paying? Rail rates in North America are often shrouded in a cloak of privacy through contracts and it can be nearly impossible to know if the rates you are paying are fair and in-line with market prices. Rail Rate Advisors offers a Rail Rate Tool to help you understand what others are paying for comparable moves.