Why is Shipping from China So Expensive?
There is no doubt that the recent pandemic has changed the face of the logistics industry significantly. The effects of the shut down of supply chains, port congestion, and cancellation of sailing and flight schedules will be felt for a long, indefinite amount of time. Trade between China and the US is no exception. With a heavy dependence on goods imported from China, the demand for shipping services between the USA and China never ceased. However, supply chains were heavily disrupted due to quarantine measures, shut downs, and other government mandates to help minimize the spread of COVID 19. As restrictions are slowly lifted across the globe, suppliers and vendors are now able to once again meet the demand of their buyers. This has created a sudden surge in the demand for shipping. In this article we explore the effects of the demand on the cost of shipping between the USA and China.
High Demand and Limited Space
As suppliers play catch up to meet the demands of their customers space and availability becomes scarce. Vessels are sailing at capacity and air cargo space is quickly booked. The amount of outbound shipments from China are more than what ocean and air carriers have the capacity. When such a situation arises the market favors the carriers. Both ocean and air carriers dictate price based on a multitude of factors. A significant component of freight costs is demand. When space on vessels is limited, carriers are able to charge higher rates, even adding surcharges on top of base rates. It is actually a common practice within the shipping and freight industry. Peak Season Surcharge (PSS) is a common charge added by carriers during time periods of higher volume of shipments.
How Much More Does it Cost to Ship From China?
In Q4 2020 prices started to increase slightly. Average pricing for a 40’ ocean container from China into the West Coast was on average $4000 per container. This price could vary depending on additional services, origins, and specific destinations. By early 2021, however, the market began taking a shift. Prices now approached $5000-6000 or more and in addition to this some carriers charged upwards $3000 as a premium to guarantee sailing within two weeks. Otherwise bookings were made for sailings over a month later. Now in Q3 2021 some carriers have freight quoted as high as $16,000-$28,000 per container! Other Asian countries have also followed suit with Vietnam and Thailand having costs around $10,000/40’ container (about double the average rate). The costs are so high that many ocean carriers require that freight be paid in advance to secure a booking.
Air freight similarly has increased like it’s ocean counterpart. During the height of the pandemic in 2020, the rates were nearly twice the market average. Average rates for cargo moving by air from Shanghai (PVG) to Los Angeles (LAX) were anywhere from $5-6 per kilo. Those rates went up to $8-10 a kilo as less flights were available due to a lack of travel for both cargo and passenger aircraft. On the upside, air freights appear to be stabilizing quicker than ocean freight.
Has the Demand Affected Transit Time?
Currently it is possible to get a sailing within one or two weeks of booking. This is, however, in paying the high costs determined by the shipping line and most likely in advance. Air freight has been travelling as scheduled as more flights are available as compared to 2020.
What About Exporting from the USA to China?
Our observation is that the cost to ship to China has not been affected nearly as much. This may be due to the ratio of goods imported versus exported into and out of the USA to/from China. The ratio of which is over 4:1.
According to Office of US Trade Representative:
- China is currently the United States’ 3rd largest goods trading partner with $558.1 billion in total (two-way) goods trade during 2019. Goods exports totaled $106.4 billion; goods imports totaled $451.7 billion. The U.S. goods trade deficit with China was $345.2 billion in 2019.
What Are Some Best Practices When Searching for Competitive Rates to China?
Transparency is the number one asset you can have when shopping for rates to China. When rates are at an all time high it is easy for freight forwarders and other shipping services to give arbitrary, high quotes. Make sure you have a full understanding of the numbers being presented. Also make sure that you have an idea of the current market by receiving multiple quotes. This will give you a baseline to compare each quote. Remember that cost is not everything. It is very tempting to go for the lowest cost especially when rates are so incredibly high. However, keep in mind that you want a strong service provider when it comes to logistics and freight forwarding solutions.
Maximum Freight is Here to Help!
Maximum Freight specializes in the China/USA trade lane. We have multiple partners and trusted agents located throughout China including the major ports of:
Our quoting process is always transparent and we will offer a multitude of solutions that best fits your requirements. Even when rates are high our team will ensure you receive solutions at a fair cost with the best service.
Contact us today with any questions regarding your shipping needs and to receive a FREE QUOTE!.