Shipping Costs Hit Record Highs

Prices Driven Upward by China-Europe Squeeze

Between the last few weeks of 2020 and the first few weeks of 2021, the price of shipping a container of goods from China to Europe more than quadrupled. Companies might have paid $2,000 to send a 40-foot container from Asia to northern Europe in November, but that same container would cost $9,000 to ship now. Some businesses have even paid up to $12,000 per container.

Prices are climbing because ecommerce is on the rise and there is currently a shortage of shipping containers. In the first half of 2020 shipping containers were left empty as coronavirus slowed trade around the world. During the second half of last year demand for goods manufactured in Asia surged in the United States and Europe. That heightened demand—and the resulting competition among shippers to source empty containers—pushed freight prices through the roof. As ports grow congested with goods awaiting shipment, shipping lines have started charging higher prices to offset long wait times.

Costs Could be Passed to Consumers

In some cases, the increased cost to ship goods surpasses the profit companies expect to retain from selling the goods to consumers. That means customers in Europe and the Americas could end up paying extra for goods shipped from Asia. The goods’ producers simply do not have the capacity to absorb rising freight costs.

“The question is, do you pay the $12,000 now and pass those prices on to customers or wait and risk stocks drying up?” wondered one leisure goods importer. The importer said the shortage of shipping containers was significantly impacting business. Some orders placed back in November were still waiting to be shipped.

Signs of Supply Chain Strain

Economists worry that the shipping delays and the rising cost of shipping could have an impact on global supply chains. In fact, “signs of strain are building up,” according to Neil Shearing, Capital Economics’ Chief Economist.

Over the next year some economists suspect that trade growth could slow under the pressure. Meanwhile, shipping lines have their fingers crossed that the Lunar New Year will slow manufacturing in Asia in February and let them catch up with the backlog of orders to ship. Additionally, analysts expect that the supply of shipping containers will eventually grow to meet demand. Still, most economists agree the container shortages could continue into late 2021.

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