September 28, 2021

Can China reverse the increasing freight cost?

All of us are aware of rising sea freight costs. In most cases, they spiked 8 to 10-fold from two years ago. Not unexpected, most carriers record extraordinary profits. Their recent 20 months’ only profits exceed all those accumulated over the last few years.

We all agree that something needs to be done. But what can we do?

Carriers claim it is all because of the lack of containers and vessel space, and our side has no influence at all on the availability of both. Of course, we could refuse to pay such exaggerated freight rates, but the demand outshines the supply. Refusing to pay means our goods will not get shipped.

Governments surely like to do something, but legislation will most probably stop them from intervening. The exception may be China.

China is probably the only nation that has the power to influence the freight cost. China started producing lots of new containers and is likely building new container vessels. It will take at least one to two years before such vessels will be operational. However, short-term China might intervene and force all those carriers calling on Chinese ports to reduce their pre-fixed rates. Such a move might be challenged under international laws, but China does not adhere to such laws. And they might tell liners to prioritise specific routes at the cost of serving less vital ports fostering their trade interests. It would not be the first time China intervened to protect their interests, aka international trade; various one-sided trade sanctions in the form of special tariffs on the USA and other countries speak a clear language during recent years.

We might be at the beginning of a full revamp of the sea freight industry. And It is most welcome since the current situation is greatly hampering the global economy.