Rates, capacity, and equipment are coming together in a perfect storm for shippers leading into the holiday season. Since the shutdown for Chinese Lunar New Year, it’s been an uphill struggle to get international logistics back running at the same speed. While equipment imbalances escalated due to blanked sailings, grounded passenger flights reduced belly capacity and forced more cargo to ship via ocean, taking up more containers, and so on until rates soared and transit times slogged. These issues have had a domino effect on the entire logistics network impacting trucking and rail alongside ocean and air shipments.
Current spot rates for ocean containers from Asia to the U.S. are running from $4,000 to the west coast and $5,000 to the east coast. Rail rates east from the west coast are up by $1500, with excess cargo rates looming at $3500 over the regular price. For the first time, truck rates are cheaper than rail on eastbound travel from the west coast. Cross-border trucking is also climbing in cost as the U.S. border with Mexico sees unprecedented delays and traffic re-routings through residential areas as the car manufacturer shipments fire back up after halting at the beginning of the pandemic.
When the pandemic hit, capacity was taken out of the market under the assumption that demand would drop but with nothing else to do, internet shopping became everyone’s favorite hobby. Once store shelves were stripped, the race to restock was on, and the reduction in capacity was felt around the planet. Rates are so out of control that the FMC and China have threatened to step in and investigate unless the graduated rate increases are removed, and sailings restored to normal. Maersk has already dropped its rate increases, and others should follow along soon.
It’s times like this that we learn the price of a volatile market. Preparation, communication, and anticipation are the only way to mitigate the current issues. During this, we depend on our relationships with carriers, contract rates and services, and broad knowledge of the best routes, alternative options, and alternatives to the alternates just in case. With a long-established industry expert in your corner to communicate changes and you can take advantage of your opportunities in times like these. Your representative at Edward J. Zarach & Associates is uniquely talented at helping you navigate the particulars of this market.