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Shipping costs set to drag on reporting season

Opinion

The World Container Index (WCI) has hit record highs, tripling in price in the last 12 months. Why should you care?

The acceleration of the Delta-variant COVID-19 via outbreaks in several counties has slowed global container turnaround rates, delayed parcel deliveries and sent spot prices through the roof. What that all translates to is higher prices you will pay when purchasing overseas goods via Amazon or fresh fruit imported from overseas.

Importers and exporters are both feeling the pinch. Both are concerned that the issues will remain after COVID, as shipping companies are internationally owned.

  • According to industry experts, the global demand for goods has risen owing to the pandemic. As it continues to outpace available capacity, spot prices are likely to remain at these levels. Containers that cost $600 pre-COVID now cost $2,000 or more. The spot price per container on the China-U.S. East coast route, has risen by 500% from $11k to $20k this week. It could be 2023-24 before things settle back.

    Why?

    The shortage of shipping containers, delays at ports, and a lower number of ships stopping in Australia are all due to the pandemic. The other reason for the heightened demand, is the massive recovery effort underway. The pandemic brought economies to their knees, many forced into lockdown. Consumer spending fell and idled ship fleets. However, massive stimulus packages such as US President Joe Biden’s $2 trillion stimulus package has suddenly turned around consumer spending as people order goods via the internet. Trade lanes have reopened but with a shortage of vessels and people.

    Container ships carry anything from electrical appliances to automobiles, so demand for anything imported has risen as economies reopen after being stuck in lockdown. ABC News says “oranges and mandarins should be bound for export markets but shipping delays and the coronavirus pandemic are making it more challenging this season.” Fewer shipping lines are making their way through Australia, which creates more complexity and added headaches.

    All this equates to one thing – Higher prices and product shortages. It’s still unclear how these higher prices affect the recovery progresses or how they will affect inflation. Regardless Bloomberg says “they should be seen as what they are: a shock that’s having a cooling effect on economic activity, rather than a long-term driver of inflation.”

    Experts say, it will be another 12 months before we see any unwinding of the global shipping crisis.

    Ishan Dan

    Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.




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