Sea Freight Rates from China to US West Coast Experience Sharp Correction
Come check out our blog to learn more about how growing sea freight rates from China to the US are influencing the rest of the trade industry, as well as the reasons behind this surge.
The spot price to ship a 40-foot standard container from China to the West Coast of the US has dropped from approximately $15,000 to just over $8,000, while shipping to the East Coast fell from more than $20,000 to less than $15,000. Analysts believe that prices were going up partly because of speculators. Now that those middlemen see an approaching off-season and China’s manufacturing capacity declining, they are offloading their inventory of transportation space.
High Shipping Costs
There are a number of reasons behind why the price of shipping has gone up so high. It started with the pandemic; economies and shipping lanes had to shut down as a health protocol. As economies shut down, everyone expected demand to fall, but the social programs that governments launched increased demand. Consumers bought gym equipment, furniture, computers, electronics, and more.
Demand increased while companies shut down factories and ports were closed due to health regulations. That inevitably led to shortages, delays, and price increases, all of which are still in effect today. There were also typhoons on the southern coast of China, contributing to the situation. In August, shipping rates had increased by 5,000% from a year earlier to $20,804; a month prior, in July, they were just $11,000.
Before the pandemic, the spot price for shipping from China to North America was around $1,500.
Next up Is the Omicron Variant
The high shipping costs are also having a profound effect on Chinese exporters. Those with low margins are finding it more challenging to ship, as increasing prices is not a practical option. Some are switching to online selling in order to survive, since that is where most consumers are nowadays. A consumer is more willing to pay for the higher air shipping costs than a bulk buyer is willing to pay for higher sea shipping costs, which is why they are selling directly to consumers.
Although prices have dropped, there are still growing concerns that the Omicron variant may push sea freight rates up again. The Omicron variant is highly contagious and is currently spreading through the Western world. If hospitalizations increase, economies around the world may be forced to shut down once again, which will further exacerbate supply issues.
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