Thursday, September 16, 2021
By YOURI KEMP
Tribune Business Reporter
A shipping executive yesterday forecast that container prices and freight rates could increase by 200 percent over current market highs as the world continues to rebound from the COVID-19 pandemic.
Michael Hall, managing director of Bahamas Maritime Logistics Service (BMLS), told Tribune Business consumers should expect increased shipping costs for the next two to three years as the world economy revives and re-opens.
He said: “The issue is the demand is greater because of the delay in shipping during this pandemic, and then with the re-opening due to a surge in service requests throughout the world. Most containers are coming from China.
“So what’s happening is the majority of containers, they’re on a shipping vessel sitting at the port. Those MVs (motor vessels) can’t get back to the origin port so they can be repackaged and sent back again.”
These shipping delays are having a “domino affect” on sectors such as food wholesalers and retailers, and construction materials. “Now they can’t even keep up with the supply and demand of creating new containers,” added Mr Hall.
As the global economy begins to stabilise, demand for products and services will increase. “Containers are being made right now. They are made with a special type of steel and have to be made to a safety standard, so it will take a while,” Mr Hall said.
He predicted shipping container prices will continually rise, adding that such costs can easily increase by 100 percent by year-end. Mr Hall said the price of containers has jumped from an average of $4,000 in 2019 to now $20,000 in some instances, and within the next year there could be an even bigger increase in freight rates.
““You are looking at a 100 percent to 200 percent increase on ocean freight rates from the highs we have right now, and we can easily see a 100 percent increase in freight costs,” he added.
“There are various ports around the world right now that are assessing their local beats in order to take on the delays in the international shipping community. So as the shipping lines increase their costs, the port increases their costs and all of that is pushed on to the consumer.”
As a result, a 40-foot container may cost up to $80,000 “depending on where it is coming from.” Mr Hall said: “If you have a shipping demand that is time sensitive, and you want your commodity within a month or a few weeks, there are express rates that are added on to that just to get your container there.
“Nothing is guaranteed because anything can happen in one of the transhipment ports, and those delays also cost me because if you can’t deliver your shipment to your client then you have the possibility of losing that contract locally.”
These shipping constraints will continue for another two to three years, Mr Hall said, adding: “Think about it. The effects of the pandemic are not just in shipping but it’s everywhere with all marine and airline sectors.
“There have been planes, due to the lack of people flying, that are just sitting on the ground and those planes need to be paid for. Some of those planes have been turned into other types of aircraft in order to get back into the market, but it’s all over in all sectors straight across. This is going to be felt for years to come.”
Advising consumers to “shop around” for the best shipping company to work with, Mr Hall said: “Always check with different suppliers. There are other countries that are opening up their markets more than others. You may have to stop using one supplier in one country. Also, check with your local Customs offices to find out what exemptions you may have on certain items. This always helps if you are trying to cut costs.”