Freight rates have gone through the roof.


What are the reasons and when will they come down again?

We talk to Michael Fitzpatrick of freight forwarder Uniexpress in Bradford

​28th June 2021
With the costs of importing goods at an all time high, Synergy has many clients who are affected and looking for some insight into what will happen next.  We interviewed Michael Fitzpatrick, Managing Director of Uniexpress, Bradford with whom we have worked closely for many years.
SiT:
Michael, since the start of the pandemic we have seen difficulties with booking containers and freight prices at first rising and now seemingly spiralling out of control.  What are prices looking like at the moment?
MF:
There is no doubt that this period is one of the most difficult that all traders and clients have faced in decades with the current market conditions.  Through most recent times freight rates from Asia to Europe have been fairly steady in the USD 1000-USD 1500 bracket per 40ft container but since the 3rd quarter of 2020 rates have soared with some predicting clients will need to pay up to USD 20,000 per 40ft container to get space/shipping in July.
SiT:
What are your thoughts on the causes of this situation?
MF:
The reasons for this are many but all are driven by the basic supply and demand situation. The carriers have less capacity than the market is demanding and therefore rates will continue to rise unless that balance switches.  

There is no doubt that more cargo was being shipped at the beginning of the pandemic  with high levels of PPE in urgent demand. This was followed by an e-commerce boom in products such as garden equipment/home  office supplies/gym and leisure products.  We believe this would have always lead to some increases in rates but then there were other factors such as PPE  being stored in containers for long periods, holding up container inventory, port delays and congestion - throughout the world really, with many countries reporting difficulties, and then of course M/V Ever Given blocking the Suez canal.   All of these additional factors created delays/surges in cargo flows which allowed the carriers to further capitalize on the situation. 
SiT:
Yes and now we have outbreaks of Covid 19 in some Chinese port districts causing shutdowns. Are the carriers profiteering in this difficult situation?
MF:
It looks like they are, with most of them expected to make in excess of USD 2 billion per quarter each this year, but they would argue that they have faced many difficult years in the past with heavy losses, and there were no clients offering to pay higher rates at that time to support them, so it appears that they are making the very most of this opportunity. In the past when the rates were high you would then see market disrupters arising in the form of some of the smaller Asian/European carriers offering to undercut rates, but they have mostly disappeared now and the market is dominated by 11 major carrier brands which are in fact controlled by just 8 carriers - so their hold on the market is very tight.
SiT:
We are aware of some severe problems with road haulage from the ports too
MF:
Yes indeed, there are also problems domestically with a big shortage of HGV drivers - an estimated 65,000 drivers have left the UK this year due to many EU nationals going home to work under more favourable conditions. This coincides with a prolonged period of very limited recruits coming into the industry as training and tests have not been able to take place due to Covid 19 restrictions.

This shortage is leading to many hauliers having to increase drivers wages to keep them, as some are being
offered high incentives such as a £1,000 "Golden Hello" payments upon them joining a different company. Haulage driver turnover is very high as you can imagine.
SiT:
Of course, all this means that importers in particular are suffering huge increases to the unit costs of imports and in many cases sales to buyers in the UK have been fixed at prices that have factored in much lower freight costs than the importing company have had to pay.  Spot rates keep running away and are unpredictable in as much as the daily rises are out of control. How and when do you think the pain is going to end?
MF:
Unfortunately there is very little chance of improvement in the short term  and we expect rates to remain high now until after the Chinese New Year in January 2022.
 
We continue to look at solutions to get goods to market at best rates including looking at China to UK by train and by road which are becoming more favourable now compared to sea rates and of course both are much quicker.
Synergy in Trade are very aware of the difficulties currently being experienced in the business of importing, and you can be assured of a sympathetic ear if you would like to explore ways of financing imports if cash flow is being squeezed.  You can call us on 01455 207770

If you would like to talk to Uniexpress about freight you can reach them on ​01274 741800