Article by: Asst. Prof. Suwan Juntiwasarakij, Ph.D., Senior Editor & MEGA Tech
Firms will not feel at ease if they are trying to ship their products from China. The surge in shipping costs is another result of the pandemic. When COVID-19 first hit China in early 2020, the country’s manufacturing froze. Competition for container space has soared, therefore it results in delays for retailers trying to import items and skyrocketing costs. In the past year, the price to ship a 40-foot container from China to northern Europe almost quadrupled and nearly triple to the west coast of the US.
SCHEDULE RELIABILITY
In terms of the number of changes to delivery dates (ETA), the Asia to US West Coast trade lanes showed the largest increase from an average of 1.7 ETA changes per shipment in January 2020 to 3.9 by January 2021. While Asia to Europe cargo ETA changes per shipment averaged 1.4 in January 2020, they increased to 3.1 a year later. By these metrics, the average delay for containers increased from about one day in January 2020, to more than five days in January 2021. Note that Carriers’ Schedule Reliability is a measurement of delay from port to port.
SHIPPING PRICES SKYROCKETING
Shipping is not normally a substantial share of an item’s total cost. But with prices so high, companies have to choose between covering the cost themselves, which shrinks their margins, or raising the retail price of their products, potentially hurting sales. Meanwhile, they face product shortages as components are delayed or the finished goods are slow getting to market. For seasonal items, such as clothing, delays of several weeks can have a significant effect on sales.
PORT ROLLOVERS
At ports, overall rollover percentages continued to climb as well, reaching 39 percent, a two percent increase on December numbers and a nine percent increase year-over-year. While overall rollover rates have increased, the major Asian ports in Singapore and Tanjung Pelepas saw no increase in rollovers from December 2020 to January 2021, while Shanghai, Hong Kong increased by just 1 percent and Busan decreased 1 percent. Port Klang in Malaysia remains an outlier with an 11 percent increase in rollover cargo from 55-66 percent month-on-month. In Europe, Antwerp and Rotterdam saw increases of 4 and 5 percent respectively within the Hamburg-Le Havre range.
ROLLOVERS BY CARRIER
Vessel operators have so far had a mixed month with Maersk seeing a 5 percent increase in rollovers, reaching 38 percent while its alliance partner, MSC, has been static at 29 percent since November of last year. On the other hand, CMA CGM, by way of contrast, has steadily increased its rollovers from 44 percent in October 2020 to 52 percent in January this year. While the biggest decrease month-on-month goes to CMA CGM’s subsidiary ANL whose rollover figures improved from 56 percent in December to 49 percent in January.
TAKE-HOME MESSAGE
The Chinese New Year is exacerbating COVID-19-related shipping delays outbound China. However, some companies are dealing with the situation by focusing on importing smaller goods that are easier to ship in bulk, or trying to find domestic sources for products. Big companies may at least be able to absorb the costs. For small businesses, it’s another challenge in what’s already been a hard year.