Global shipping rates continue to rise in 2024
Global shipping rates are continuing to increase after a period of uncertainty and oscillation throughout 2023 and the first half of 2024. According to a recent report from Statista, freight rates slumped to their lowest level in some time in October 2023.
In October, the average price of a 40-foot container dropped to only $1,342. However, new issues with global trade are once again causing prices to spike. By July 2024, the average price of a 40-foot container was more than $5,900 – the highest value recorded so far.
So, how did we reach this point, and what will organizations need to do to ensure they can navigate increasing costs in the months and years ahead?
Macro-economic trends affecting global trade
As the Statista report notes, the global supply chain is fragile. One small disruption can lead to a significant ripple effect that influences not just companies shipping goods overseas, but their container shipping partners and consumers, too. The pandemic undoubtedly had a major impact on global supply chains, presenting new issues with port closures and labor shortages.
However, the residual effects of the pandemic aren’t the only thing affecting shipping costs. The last year has been particularly tumultuous for the maritime shipping landscape. Geopolitical tensions in the Red Sea have necessitated the routing of shipping vessels to safer but longer paths, increasing transit time, fuel consumption, and operational costs.
New sanctions on imports and exports in regions like China, as well as growing demand for sustainability and efficiency in the shipping sector, are also having an impact.
Plus, demand for shipping services is growing. As online spending continues to grow, companies are struggling to access the containers they need to send goods overseas. While carriers are beginning to use the profits they’ve earned from previous years to increase their carrier capacity, the delivery of the new ships they’re ordering is still years in the future.
In the meantime, organizations are left paying premium prices simply to secure space in a container. Some analysts are even beginning to share fears that ocean cargo prices could even reach the post-pandemic peak of $30,000, and remain there throughout 2025.
Strategic planning and partnerships become crucial
In the years ahead, increased investment in container ships and new strategies for minimizing port congestion or improving routing strategies could allow container prices to begin dropping again. For now though, companies need to act fast to maintain their financial health.
Already, many smaller companies are struggling in this new landscape, as they face not just higher shipping costs, but issues with late payments and customer acquisition.
While companies can’t control the costs charged by their shipping partners, they can use careful planning to make the most of their available budget. As container costs continue to rise, businesses of all sizes will need to take extra measures to improve resource allocation.
Working with an online freight forwarder, for instance, can help businesses make more informed decisions when booking shipments with carriers. Freight forwarding platforms can help organizations track shipping rates in real-time and compare options for multiple partners simultaneously.
Access to this information ensures that business leaders can explore a range of options for potentially reducing long-term shipping costs. For instance, during periods of peak demand, companies might leverage full container load (FCL) shipping strategies to send more goods to locations closer to their customers, reducing the need to rely on maritime transport for smaller shipments in the future.
In periods when maritime shipping becomes too expensive, complex, or risky, organizations may choose to explore different shipping methods, such as air freight. Although air freight has been a more expensive option for many companies in the past, the ability to diversify shipping routes and strategies can help businesses stay resilient in a complex landscape.
Preparing for an unpredictable future
As global shipping costs continue to oscillate unpredictably, preparation will be key for companies hoping to preserve their budgets and minimize risks. Aside from using freight forwarding platforms to plan ahead and prepare for seasonal changes, we may see companies:
- Investing in diversification: As well as exploring multiple freight routes, such as air and land freight, companies may diversify their suppliers and shipping partners. This could help reduce reliance on suppliers in regions with complex export rules (like China), and allow companies to explore a wider range of shipping routes.
- Optimizing the supply chain: Many companies are already implementing strategies to optimize their supply chains and reduce operational costs. Automation tools are becoming more common to help minimize overheads and fight back against labor shortages. Companies are also experimenting with LCL (less-than container load) shipping, to reduce supply chain expenses for smaller shipping requirements.
- Price adjustments: If shipping carrier rates and operational expenses continue to increase, we may see retailers re-evaluating their pricing strategies. Consumers may begin to see higher prices for goods and delivery services to ensure companies can absorb most of the additional costs associated with selling products worldwide.
The next few months, and even the year ahead, can be challenging for global sellers. For all businesses, a focus on analysis, planning, and constant optimization will be critical to keeping costs manageable and preserving a strong global footprint.
Navigating the next era of shipping
Shipping costs have long been a significant challenge for business leaders of all sizes, particularly those with a global presence. As economic uncertainty continues to plague the landscape, geopolitical tensions affect the supply chain, and carriers struggle to adapt to demand, the issues organizations face will only continue to evolve.
The good news is that innovative technology and a focus on data and strategic planning can help businesses remain competitive in this space. Although preparation won’t prevent shipping costs from rising, it should ensure that business leaders can make intelligent decisions on how to use their resources and budget more effectively.
