Year 2021 was a real challenge for entrepreneurs all over the world, caused mostly by broken supply chains of finished goods, semi-finished products and raw materials. There is no doubt that around 90% of global trading is moved via maritime transport, which is considered the cheapest and the most voluminous – it allows to transport huge amount of goods at the same time.

Maritime transport also has another important advantage: you can ship your goods as FCL (Full Container Load) or LCL (Less than Container Load). Long story short, FCL is shipping cargo loads enough to fill full containers to one consignee while LCL is when different shipments share container space for different consignees but are delivered to the same port of discharge. Thus, freight rates are adjusted to individual needs of each shipper.

A container ship does not sail from point A to point B but berths in few calling ports on the way discharging some containers and loading others. Before the outbreak of coronavirus pandemic sailings were relatively punctual- of course, we cannot forsee everything because maritime transport also depends on weather conditions. Space on vessels was available even one week before estimated time of departure from port of loading and freight rates were very attractive. A cost of transport is a crucial component of a final product price, which is paid by a final consumer – everyone of us.

Throughout the whole year 2022 freight rates remained at the same level, we did not observe significant fluctuation. The situation started to change in February 2022 when rates on one of our export destinations to the United States  went up by 15%. It was also a turning point in maritime transport as in the following months prices skyrocketed unexpectedly and reached 140% of the initial quotation.

When it comes to Canada, we observed even more severe increase of more than 200%. And on top of that, high freight rates did not guarantee available space on vessels or catching a previously agreed sailing or even availability of empty containers in depots. Due to fast-spreading Covid-19 pandemic, temporal suspension of operations all over the world and overall economic slowdown, containers were stuck in places where they were not actually necessary.

This trend was observed very strongly in the United States, where companies received financial support from the government to mitigate negative effects of the pandemic. And here we are dealing with one of the basic economic principles where with increased demand and supply not keeping up with it we notice an increase in prices. We are talking here about the prices of raw materials, semi-finished goods, finished products and transport as well.

As we know, Asia is a “global factory” from where majority of goods are exported to Europe and both Americas. In a situation, where there was a shortage of available equipment to move goods, shipowners decided to rise rates and even transport empty containers where they were absolutely needed.

Increased American demand has led to huge bottlenecks in the local ports. They did not keep up with the discharging the vessels and they had no place to store empty containers. At certain point, more than 100 ships were waiting in line at the port of Los Angeles / Long Beach. The waiting ships, being loaded to the brim with containers with goods, began to be delayed by several dozen of days. What is worse, Americans were unable to smoothly pick up containers from ports, which led to railroad congestion and container chassis shortages. The use cycle of one container has increased significantly.

Shipowners began to raise rates in from week to week to sometimes absurd levels, where transport was even more expensive than goods transported in a container. Places on ships sold out very quickly because of the delays and it was necessary to book them even two months in advance, often without knowing the rate that will apply. The shipowners were not able to estimate the cost of transport for more than 2/3 weeks ahead.

The situation on the transport market has forced importers and exporters to be creative and look for alternatives to transport goods. One of them is the choice of a different unloading / loading port than the one previously used and the transport / delivery of goods by truck, even at longer distances. In our case, this solution also worked; we decided to deliver to less congested ports, gave up rail transport and focused on reloading goods to trucks at unloading ports to deliver them to the customer faster. In comparison to the pre-pandemic period, the transit time to the customer’s door has doubled. Therefore, the few days that we “save” on skipping the railroads are at a premium for our customers.

The availability of space on the ships has not changed yet, but we will see what the next months will bring. We can be sure that transport rates will not return to pre-pandemic levels. The continuous increases in oil prices on global markets, which is a source of power for container ships sailing on the seas and oceans, as well as for trucks delivering goods to warehouses are not helping with the prices as well. They may only fall slightly but will remain at historically high levels.

Strained supply chains and overloaded ports can be restored by price increases that will slow down the demand for consumer goods. On the other hand, the stocks of raw materials and semi-finished products accumulated by producers and wholesalers may reduce the demand for them and there will be a need to sell them quickly, even at lower prices, to make room for new supplies. So the future is uncertain, and even reading from the stars will not help us discover what it will look like in the next few months.