Shipping Prices Could Be About to Skyrocket (Again)

The average cost to ship a 40 ft. container from China to the U.S. West Coast could soon hit up to $8,000 for a yearlong freight contract, a record high and a significant increase over last year's average of $5,500.

The Wall Street Journal reported that yearlong freight contracts are set to be hammered out at the TPM conference in Long Beach, California, this month, but shippers should expect significant price hikes, as "importers are putting a premium on reliability and predictability of services" after years of disruption and variables.

“We are now increasingly seeing importers sign up to yearly contracts early as well as to contracts of a longer duration,” Lars Jensen, CEO of Danish advisory firm Vespucci Maritime, told the Wall Street Journal. “It is about managing risk in an environment where the uncertainty about the stability of the supply chain in 2022 continues to be very high.”

If shipping costs indeed rise as expected, already-higher prices for promotional products will almost certainly continue to increase as suppliers adjust pricing to keep up. And, in addition to existing COVID-related supply chain disruptions across Asia and the West Coast, the Russian invasion of Ukraine could put further strain on international shipping.

Glenn Koepke, general manager of network collaboration at supply chain consulting firm FourKites, told the New York Times that ocean freight rates could reach $10,000 per 40 ft. container, or even go as high as $30,000.

The invasion has already impacted shipping operations in the Black Sea. Business Insider reported that since last week multiple ships have been fired upon or detained. More than 200 ships were also waiting to cross the Kerch Strait, which connects the Black Sea to the Sea of Azov between the Crimean peninsula and Russia.

Experts warn the conflict between Russia & Ukraine may lead to a triple ocean freight rate. No doubt the war has heavily impacted logistics around, especially the Black Sea.

Click https://t.co/hQFwh3GMLi to join GLA.#freight #logistics #shipping #freightforwarder pic.twitter.com/vzOQsW0Mq8

— Global Logistics Alliance (@GLA_FAMILY) March 2, 2022

Additionally, the U.K. banned Russian ships from entering ports, while other Western European countries like Belgium, the Netherlands and Germany have said that ships en route to Russia will be stopped and inspected. Maersk announced this week, too, that it would suspend shipments to and from Russia and Ukraine temporarily, along with other shipping companies ONE, MSC and Hapag-Lloyd, making it a significant move in the shipping industry.

This has forced ships to reroute, which has caused congestion at European ports. The conflict could also impact air freight as carriers divert flights around now-restricted airspace, driving up prices for air freight due to longer routes and higher fuel costs.

Longer term, however, experts think that daily shipping rates will fall later this year as COVID waves hopefully subside and people go about their normal business again. But, with a few shipping companies controlling prices, it's unlikely that those freight shipping rates and yearly contracts will decrease in price too dramatically.

“With the alliances controlling capacity, there is no chance freight rates will fall off a cliff and return to pre-pandemic levels,” Patrik Berglund, CEO of Xeneta, a Norwegian transportation data and procurement specialist, told the Wall Street Journal.