The pandemic has impacted all businesses in some way. However, for those dependent on international shipping, these complications have been significant. Long delays, an increase in port congestion and the risk of cross-contamination have all meant that transporting freight – especially by the sea – has become a costly affair. Shipping costs are estimated to be as much as 9x higher than they were before March 2020. No matter the size or scale of your operations, increases such as these will hit hard. And, paired with the reduced ability to track shipments and maintain good delivery times for customers, you could see reputation falter too. In this guide, we’ll look at the causes for this influx and how to navigate this within your business.

What is Causing the Ongoing Sea Shipping Cost Increase?

For anyone that regularly moves goods between countries, the rise in shipping costs will likely come as no surprise. The COVID-19 pandemic brought a wave of factory closures, impacting the manufacture of containers and pushing lesser-developed ports into chaos. While global lockdowns seem in the past for many countries, many of these issues continue to pose a challenge. The announcement of the omicron COVID-19 variety in South Africa in November 2021 swarmed in to replace the previous strain. While the symptoms were predicted to be much less severe than Delta, actions to reduce the spread of the virus have remained strong. This has forced many businesses to close their doors as the number of infected employees (and, in turn, isolations) has risen. Businesses reliant on foreign manufacturers are facing significant shortages in their products and raw materials alike.

Weakness in Supply Chains

The pandemic has also shone a light on a significant weakness within many supply chains – most prominently, the dependence on international production. When factories closed and shipping became a significant challenge, so did many businesses’ ability to get the goods they needed. There are two key responses to this. Move your supply chain to a domestic supplier which generally incurs higher fees and demand. Or, ‘panic buy’ in bulk from your international contact, reducing their stock levels and increasing demand from other businesses. Both have contributed to the increase in shipping costs – businesses are requesting more space on each passing vessel and skyrocketing demand oversupply.

Port Congestion

While the wider public has only just become aware of the issues facing underdeveloped ports (note the 2200,000-tonne Ever Given vessel that blocked the Suez Canal for 6 days in March 2021), the issues are by no means new. The move to online shopping has long been increasing demand in ports. The pandemic accelerated that, with much challenging boredom and isolation with online shopping. Cargo facilities designed to hold stock for a short period of time became overwhelmed with the number of deliveries. And, the global container shortage also accelerated the issue.

In line with this, shipping vessels are becoming bigger to cope with the increased demand. In a normal situation, this would reduce shipping costs for carriers. Maritime transport costs fall and more space allows for more shipments to be made each trip. However, to accommodate these larger ships, there also needs to be an improvement of the infrastructure. And, this hasn’t happened in many ports. The issue hasn’t changed in 2022 – we are still seeing busy ports unable to handle the vessels that are trying to pass through.

Chinese Lunar New Year

The celebrations for Chinese New Year are marked, not just by fireworks and food, but also by the closure of many businesses. Most factories shut their doors for 10 days, giving time for their employees to travel home and the celebrations to begin. Traditionally, this has been a key factor in the organisation of stock deliveries. There is an annual rush at the end of January to get goods through business doors to compensate for this closure. Every year, this pushes sea freight prices up marginally but one that business owners can accommodate for. In 2022 however, paired with an ongoing viral spread and port congestion, this increase is expected to soar.

In response, some experts suggest that Chinese factories will stay open in a bid to reduce this but the actual impact will be difficult to assess until after the holiday has passed.

Making International Shipping Work For You in 2022

As a business owner, ocean freight price increases will come as a concern. Any increase in your supply chain directly links to an increase in cost for the end-user. And, with competition continually rising, this presents a significant issue. Understanding the options available to you is the best way to tackle this issue strategically.

Consider Domestic Manufacturing

In recent years, there has been a call for British businesses to move their manufacturing back to the homeland. Made In Britain is a key driver in this focus, encouraging businesses to bring back strength to our native manufacturing communities. Companies that qualify are awarded the registered collective mark which can be used in their marketing collateral and to drive customer interest.

There’s no denying that many businesses traditionally opt for international suppliers due to cost. And, it’s unlikely that this will change. The price of raw materials and demand for equal pay in the UK means that many items are more expensive. But with that, you get an assurance of quality, the ability to communicate face-to-face with your suppliers and the elimination of international trade having as big of an impact on your business.

Change Your Freight Choices

Traditionally, sea freight has been the cheaper and more financially sound option. In 2022 and with prices soaring so high, now may be the chance to consider another alternative. Many businesses are switching to air freight instead. The additional costs are outweighed by the speed of delivery and the convenience. If delays are causing significant issues for your business, paying more for speedy delivery could be the boost that your brand reputation needs.

Work With A Freight Forwarder

Shipping costs will always fluctuate – regardless of the pandemic or other external factors. The best way to get the most economic deals is always to work with a professional. Freight forwarders use their database of contacts and wealth of experience to get you the right deals for your shipment. And, with the unpredictable climate as it stands, there has never been a better time to consider adding them to your team.

Radius Warehouse & Logistic Services have over 25 years of experience as independent freight forwarders. With logistic services for worldwide cargo movement and a specialism in the USA and Far East inbound and outbound movements, we’re here to support you through these turbulent times. Contact us today for a quote or to discuss your shipping needs.