Shipping costs
are at record
high levels and they are here to stay
Current Global Situation: The pandemic has taken the global economy to placesthat we never thought possible. One of the most affected sectors is logistics. The imbalance in the supply chain has led to record increases in the price of freight and it is expected that this is here to stay. This is a graph of the shipping rates of containers from Central America to South Florida:
As seen above, from October 2019 to October 2021, there has been an increase in shipping rates in these routes of more than 45% and it is expected to keep rising. There are four main factors that are disrupting the world´s supply chain and leading to all of this:
Global supply chain imbalance: As mentioned before, the pandemic has led to huge imbalances in the global supply chain. The increase in the demand for Asian goods has outpaced the allocated shipping supply needed to ship all of those goods leading to a direct increase in the shipping rates from Asia. This increase in shipping rates has resulted in shipping companies diverting vessels from our routes to Asia. Shipping lines are prioritizing the most profitable routes. This has created fierce competition for using the available space of the remaining vessels in the routes we use, leading to increases in rates like never before. This is not expected to change in the near future, based on what the shipping lines told us. The supply chain needs to level for this to change.
Ports congestion and closure: Given the huge imbalance in the supply chain and the constant policy change (like ports closing), the overall performance of shipping companies and ports remains the lowest it has been in the past decade.
Low availability of ocean containers: This is due to a slow return of empty containers, slow production of containers, and high cancellation in port calls.
Few alternatives to ocean freight: Air and land shipping capacity are not only extremely constrained but also tariffs have spiked as well.
This is a graph of the shipping rates of containers from China:
All of this is here to stay, we just received news from the shipping companies that there will be a peak season surcharge.
Increase
in packaging
material costs
In January 2021, we started receiving price increments from all of our suppliers. From corrugated boxes to bags, over the last 12 months, we have had an average increase in the price of 9.38% in all of our packing material. This has been the consequence of a disrupted supply chain and inflation.
As mentioned before, this is here to stay and we must adapt to this new world. The Unsipcie Team is committed to mitigating this as much as possible, from changing our logistics to exploring new packing materials, we are doing everything to adapt.
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