Increase in Air Freight Rates
Due to COVID-19, many things have taken a different turn. This caused different impacts globally including the cost of shipping goods and exports taking a high hit in the rates. The exports take place through three major modes: Train, Ships, Flight. While airfreight capacity of carrying mass volumes remain 57% of the total market and it also includes freighters. The capacity has reduced up to 18 % due to the current situation. Sometimes an event becomes a cause of another event. It is no secret that recently the world was experiencing a huge container shortage in the global marine chain. Before the world could recover and get back on track, the recent blockage of the Suez Canal contributed to the disruption of the marine time market. The load of the disturbed logistic chain was shared by air freight causing an exponential hike in prices.
The volumes going out of China to have been increasing massively post-COVID-19’s first lockdown. The conditions are not getting better, and the high volumes are lined to be transported to the US Market. In crucial situations, service comes with a high price. From Hong Kong to the US, soon the prices going to the extent of peaks with HK 100$ (US $12.88)/kg. Earlier in October last year, the heavy hi-tech market booked a certain percent of transporting lines when Apple was preparing for the iPhone12 launch. During that time the whole world suffered from container shortage and peak prices all over the airlines globally.
The rapid COVID-19 kits, medical respiratory, and many other such emergency items have been heavily exported. While with a huge line of trucks in the airports waiting for the goods to be distributed throughout the European and American market. All the countries are facing challenges in transportation of goods as the rates are very high to Europe and US, relatively.
As per certain reports, the prices of charter planes are costing sky-high, especially when taken to the US from Europe or Asia. The situation is worse where the forwarders are being promised to get the requested plane within ’10’ Days. The assurance is given after filing the request and no sooner! The price hikes and shortage of containers, not to mention the busy lines not just airways but also marine time. The conditions are causing huge delays in the shipment of parcels from major express companies. The freight rates has hiked up to 20-30% globally
Increase in Ocean Freight Rates
There has been a huge increase in ocean freight costs in the last few months, which has resulted in many exporters facing losses in their business from various nations. This upsurge in the freight cost has crossed the limit and has made it difficult for the exporters to make a profit.
The increase in ocean freight costs is over 100% in the last few months especially for the exports made to Europe and the USA. This rise has been a setback for the exporters as they have to bear huge losses.
A few months earlier to export a 40-foot-high container the company had to pay $4000 as the total charge of export. But now, due to this upsurge in the prices the company had to pay approximately $10000 as the total charge of export. This information was conveyed by the experts.
As the price difference in the currency of the USA and Europe is more that’s why the companies import goods from India. But, countries like South America, East Europe have similar labor cost structures as India and import from the country due to technology and ease of operation.
Many customers of South America have refused to import goods from India because of this increase in Freight costs. Due to this huge upsurge in expense many West African and eastern nations have also stopped ordering goods from India. Even the normal export cost to these countries has witnessed an increase of about 200% has stated by the experts. His firm is also losing orders due to this unrealistic increase in the freight cost. Many companies have maintained their business with Middle Eastern nations besides this upsurge but with reduced profits and high labor charges.
According to the experts, the main reason for this unlawful price rise is the monopolization of the export market by few top expert firms. They are increasing the prices according to their will in the global freight market
How Suez Canal blockage affected ocean freight cost:
On 23rd March morning, a 400-meter container ship weighing 200,000 metric tons got stranded in the Suez Canal. This led to a massive traffic jam at the trade route.
This Suez Canal trade route enables direct shipping between Europe and Asia and it has around 50 ships passing through it every day The amount ships passes through this route is approximately 12% of world trade.
The backlog made ships reroute via Africa which became a time-consuming and costly affair. Rerouting via South Africa’s Cape of Good Hope added 6,000 miles to the journey and increased the fuel cost something like $300,000 for a super-tanker delivering Middle East oil to Europe, as per a Bloomberg report. With this time consuming and costly route, the ocean freight rates went very high for the global freight market