Maritime Shipping Update- Part 2

Maritime Shipping Update- Part 2

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Global Freight Update

The freight rates and carrier profits during the past two years have been affected by the continuous container shortages, supply chain disruptions, and port congestions. The increase in shipping costs in 2021 is seen to raise inflation by about 1.5% during the second half of 2022.

Compared to last year, the ocean freight for the coasts of Asia to the US decreased by 13% at the end of June, while Asia to US West Coast costs reduced by more than 50% in June.

Recently, the long-term spot rate for a 40-foot container from Asia to the US via the West Coast, including Los Angeles and Long Beach ports, is approximately USD 7,900+, double the rate of 2021 costs. On the other hand, the short-term freight for the same container size is approximately USD 7,700+, nearly doubling last year’s rates.

Meanwhile, the spot rate for a 40-foot container from Asia to the US via the East Coast, including New Jersey and New York ports, dropped by 1% and is approximately USD 11,500+.

Some investment and industrial suppliers report that due to the current situation, while considering the various global impacts, more than 60% of shippers will remain on spot rates, not only for a quarter, but it may take longer than two or three years. However, earlier in June, the US House of Representatives approved a bill to improve maritime shipping, overcoming inflation and bearing export backlogs.

Reducing Shipping Delays and Costs

Manufacturers and companies try to reduce shipping costs and delay risks by looking into different approaches. It includes procuring a more consistent supply by applying dual sourcing. Companies can source goods through domestic suppliers to maximize delivery times and stable supply materials.

Companies may also consider moving production locations to lessen the product’s distance travel which may increase the readiness and stability of products.

Another way to reduce the risks of shipping delays and costs is for companies to evaluate their insurance policy programs and commercial contracts to what extent the coverage for lost or delayed goods is given.

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