Shipping rates are on the rise again, leaving logistics teams around the world struggling to secure capacity without stretching their margins too thin.
Bloomberg reports that many carriers are charging as much as 25% more than they were this time last year. And while spot rates and contract rates typically soften towards the end of May as new, year-long shipping contracts are inked, two years of increased demand and bottlenecked supply chains have placed a significant amount of pressure on the industry. Steady price spikes into the new fiscal year indicate that a “return to normal” isn’t in the short-term forecast.
Here’s everything shippers need to know about the current shipping landscape—and some steps they can take to prepare for future rate increases.
How high are shipping rates right now?
On June 1, 2021, major ocean carriers applied for a general rate increase (GRI) of $1,000 to $1,200 per 40-foot equivalent unit, according to a recent report from S&P Global. At a time of year when rates are usually at their lowest, a significant spike has pushed rates along many major shipping routes past record highs.
As of June 1, transpacific eastbound container rates are currently set at $6800/FEU, which is $400 higher than the previous record set back in January 2020. This is bad news for shippers who may still be recovering from pandemic-induced losses—and the worst may be yet to come.
How long will price spikes last?
Historically, peak shipping season begins in July. A steady rise in prices leading into a period of consistently high shipping demand doesn’t bode well for shippers seeking more sustainable rates.
“This will last into Lunar New Year 2022,” one source told S&P Global. “Peak season surcharges were always mitigated in years past, similar to GRIs, but we’ve never seen these types of increases.”
To put it simply, the shipping landscape has never really seen a consistent rise in rates quite like the one it’s experiencing right now. That makes it difficult for experts to predict exactly how (or when) the market will respond. It’s safe to say, however, that higher prices are likely here to stay, at least through the end of the calendar year.
What can logistics teams do to combat higher prices?
To offset rising shipping rates, many organizations are passing the cost off to customers. This can help protect the bottom line but runs the risk of making companies less competitive in the market. Others are investing in advanced logistics technology, which, despite involving an upfront investment, can ultimately save them money in the long run, even as shipping rates continue to rise.
An advanced transportation management system (TMS) makes it easy to source quotes from a vast pool of carriers and compare options. Logistics teams don’t have to spend hours on the phone, and shippers can always be sure they’re getting the best possible rate.
In addition to having a strong process on the front end, supported by leading-edge technology, shippers can avoid needlessly overpaying by relying on outsourced freight audit services that will catch any mistakes and process refunds. A high upfront rate isn’t ideal—but it’s even worse if erroneous accessorial charges are tacked on top or an invoice is accidentally duplicated.
Combined, TMS and freight audit data can also help shippers forecast future spikes—giving them time to prepare.
Combat rising shipping rates with smarter solutions
As shipping rates continue to rise, every penny matters. CTSI-Global can help you put them back where they belong—in the bottom line.
Don’t let rising shipping rates spell disaster. Contact us today.