High rates, slow service forecast until end of January

The festive season will be spoiled for European importers of consumer goods from Asia this year. A lack of capacity and exploding transport costs for goods from the Far East are set to last until well into the new year.

Analysis by software company Setlog forecasts delivery delays, capacity bottlenecks and freight rates at a very high level until at least the Chinese New Year (end of January). The situation is expected to ease somewhat by Easter
2022 at the earliest, the experts stress.

Setlog evaluated data from around 100 brands using Setlog’s SCM software OSCA from July 2019 to July 2021.

A mix of causes has kept global freight traffic working at its breaking point for months. On the one hand, the Corona pandemic shook up global supply chains and caused warehouses to overflow because of closed stores. On the other hand, there was increased demand from some industries and importers.

Constrained capacity

Shipowners, meanwhile, ramped down capacity to keep prices high. “Although new ships and containers have been ordered, it takes months to put them into circulation,” said Ralf Duester, board member of Setlog. Exacerbating the situation is the fact that there has been an export boom in Asia, which is additionally driving demand for spare transport capacity.

“Unpredictable events such as the Ever Given accident in the Suez Canal, the closure of the port of Yantian or, more recently, the partial closure of the port in Ningbo make the situation even worse,” Duester said.

The peak of the price explosion in sea freight from China to Europe was recently seen with a US$20,000 bill for the transport of a 40-foot high-cube container. In July, prices for containers from China to Western Europe hovered between $14,000 and $16,000.

Depending on the relation, shipping company and loop, this corresponds to six to eight times higher than pre-pandemic prices. For shipping Christmas items from Asia by sea, Setlog forecasts six to eight times the price compared to 2019 levels, depending on the country of production.

Slower service

However, high rates in sea freight do not guarantee on-time deliveries. On average, goods were eight days longer in transit from Asia than before the pandemic. Setlog calculated that sea container transport takes up to 42 days.

Causes include canceled voyages (blank sailings), slow ships and delayed unloading at ports of destination. The data also shows: importers from the apparel industry reduced volume between 25 and 35 percent compared to the 2019 analysis period, depending on the item, due to the pandemic situation.

All modes affected

Volume decreases also occurred in air freight. For example, this transport segment accounted for only seven percent of the companies analyzed – compared to 23 percent in 2019. The pandemic was also the main reason for this: textiles and light consumer goods that are flown were stocked in overflowing warehouses – and volumes reduced slowly.

Because rail transport also reached its capacity limits, capacity bottlenecks also occurred in this mode of transport from China to Europe. Goods are currently being cleared in China and at the various customs crossings, in some cases with extreme delays. Delays of up to two weeks are currently possible. Setlog observes that bookings are currently made four to six weeks before the train’s departure date.

Some companies have already reacted to the tense situation in global freight traffic. The heads of KiK and Rossmann predicted at the beginning of July that price increases would be coming in the retail sector. And economic experts are currently no longer ruling out the possibility that the inflation rate could temporarily rise to four percent.