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Profound Impact on Trade from Rising Freight Rates

Profound Impact on Trade from Rising Freight Rates

(16 December 2021 – China) Rapidly rising shipping rates compounding crippling supply chain disruptions are straining China’s minnow commodities exporters as key industry stakeholders prepare for further challenges as elevated freight rates could extend well into 2023.

Chinese exporters continue to stockpile goods in warehouses as cash flow dwindles, while others endure higher shipping rates amid supply-chain disruptions. Despite exporters voicing their alarm, China’s foreign trade performance beat expectations in November with an 8.4 percent growth in exports month-on-month.

The surge in freight costs and associated expenses are chiefly attributed to a misalignment between increasing demand and decreased supply capacity coupled with labour shortages and rolling unpredictable COVID restrictions imposed on affected ports now reeling from the spread of the new Omicron variant.

In early November, 11 percent of global container volumes was being held up in bottlenecks, slightly lower than August records but well above the pre-pandemic total of seven percent, according to Berenberg analysts. Containers may end up waiting three or four more weeks at ports on West Coast of the United States compared with pre-pandemic levels, according to shipping and logistics company Maersk.

“Ports in Southeast Asia can be 30 per cent more congested than usual, with ship schedules seriously delayed. There are fewer returning ships, and they are returning more slowly. The effects ripple throughout the supply chain” stated Guangdong Smart Logistics Frank Xu.

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