Sea Freight is a popular option for shipping promotional products from China as it is more affordable and is recommended for products of higher quantity. In addition, China has many of the busiest and efficient seaports in the world, such as Port of Shanghai, Port of Shenzhen, and Port of Guangzhou. Also, major shipping lines will go by these ports. However, we have realised that over the years, the shipping costs from China has increased tremendously.
Shipping Costs From China
For example, this is a Custom Cooler Cart.
To ship 200 pieces of it, it will be a full 20 feet container (FCL).
On January 2020, to ship this product from the Port of Shanghai to the Port of New York/ New Jersey, the costs are:
1 Full Container Load (FCL) = USD$3,000
Recently, in June 2020, the shipping cost was:
1 FCL = USD$5,500
Do check out our blog on branded shipping containers, we totally recommend them for Shipping companies!
Statistical Data of Market Rates for Shipping Containers
As shown from the quotations above, the price of one twenty-foot equivalent unit (TEU) has increased by around 80% from January to June in 2020.
In fact, according to the Freightos Baltic Index (FBX), which measures the market rates for containers, it has shown a positive correlation between the data and our above quotations.
Overall, there is an increase in market rates from January to June 2020.
On 3 January 2020, the FBX from China to the East Coast, it was USD$2,649. It dropped in the month of March and remain almost constant, around the $2,500 to $2,800 range, until the end of May. However, the FBX shot up to USD$3,273 in the month of June.
This is likewise for the FBX from China to the West Coast, having a drastic increase in the month of June.
The Global Container Index has also shown a general increase in the year 2020.
Why is there a spike in shipping rates in June 2020?
Shipping rates constant fluctuate due to demand and supply factors. When the demand exceeds the supply of fleet capacity, it will result in an increase in shipping costs.
With the recent COVID-19 outbreak in the first quarter of 2020, it has led to a drop in demand for cargo. Hence, prompted container carriers to reduce their fleet capacity to cut running costs and minimise losses.
As shown in the graph below, the majority of shipping lines have reduced their fleet capacity. Maersk and MSC have the highest decrease in capacity of around 236,000 TEUs.
In June, there was an unexpected spike in demand. With the combination of tight supply, it pushes ocean freight rates up. (Source: EPS News)
The spike of demand could also be due to the increasing demand for PPE supplies, especially when the outbreak is dire in the US.
To learn more about the documents needed to ship protective equipment out of China to your location, check out our blog about certificates for PPE.
Fuel prices can also affect the shipping cost from China. A higher fuel price means a higher fuel surcharge in the shipping cost.
However, they do not make a big impact as much as the market forces. As shown above, the global average bunker price has decreased in 2020, with the lowest prices in the month of March. However, there may not be a direct relationship between the two factors as overall shipping costs increased.
Forecast for Shipping Costs from China to the USA in July 2020
According to DHL, it is anticipated that the demand level for ocean freight is expected to continue to increase in July. Furthermore, based on the data below, it is predicted that the freight capacity for Asia to Noth America routes will decrease moderately (highlighted below). Therefore, with tight capacity and growing demand will lead to rates increasing moderately.
What About Other Regions During this Period?
Although there is a general increase in market rates globally, it may be not the case for other regions. For example, shipping costs from China to North Europe, there is a general decrease in prices from January to June.
However, based on the market outlook for July, it is forecasted that rates will increase moderately as shipping capacity remains constant.
Market Outlook for 2020 – 2024
Once the pandemic is clear, we will start to see a recovery in the economy and for shipping companies. It is forecasted that the shipping volume from China/ East Asian Region to North America will increase by 6.7% to 15.3 million TEUs, from 2020 to 2024. Also, shipping volume to Europe and the Mediterranean will increase by 5.5% to 11.2 million TEUs.
With an increase in shipping volume from China, will we foresee a drop in shipping costs?
How ODM can help
ODM has been in the promotional product industry for over 17 years and is well-experienced in producing and delivering high-quality custom promotional merchandise. Also, our committed team of merchandisers will ensure effective logistics snd shipping management with proper planning management of the key supply chain stages. Therefore, making sure that the consignment is delivered to you efficiently. Should you have any queries, do not hesitate to contact us.
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