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High freight rates make it increasingly impossible for shippers to stay in business

Time:2021-06-04 Publisher:Kevin Num:5041

Freight rates on major trade routes are squeezing retailers' margins and making the transport of some commodities unsustainable.

According to an analysis by Sea-Intelligence, a maritime consultancy, average spot rates and carrier premium charges are critical to securing container and space bookings, which means that actual rates from Asia to the US West Coast are close to $10,000 /FEU and over $12,000 /FEU to Northern Europe.

Sea-Intelligence looked at the impact of these record high shipping costs on a range of high-end and low-end goods across a range of industries.

"Clearly, the most affected category in the analysis is assembled furniture, which now accounts for 62 percent of the retail value of goods shipped when the goods are in the lower range of merchandise value," the report said.

Meanwhile, freight for low-value large appliances has accounted for 41 percent of the value of goods, and even for small appliances, it now accounts for 27 percent of the value of goods, according to the analysis

This is despite recent reports that some shipping lines are trying to force smaller contract shippers to adopt FAK rates. But Sea-Intelligence acknowledges that large shippers that sign contracts will enjoy lower rates than in the current spot market.

There is evidence that freight rates have risen significantly over a long period of time and as we approach peak season rates are likely to be higher, potentially undermining many contracts for lower value, lower margin goods.

One garden furniture retailer said customers had been "pretty shocked" recently.

"The average buyer is very good at comparing prices on Amazon and other sites, but they may find that a lot of inventory on those sites is not available," he said.

"We've already had to raise the price of yard garden kits by about a third this year, just to cover the extra shipping costs, and we may have to raise our prices when we finally receive our next shipment." "He added.

Alan Murphy, chief executive of Sea-Intelligence, believes rising freight rates are having an impact on trade.

"Overall, it is clear that we are now in a phase where an increasing number of shippers will not be able to maintain their business with the current high freight rates." He said.

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