Over the last couple of years, starting around the mid-way mark of 2019, the price of shipping containerized cargo across international borders began an upward climb.
Since that time, these price increases — which can be attributed to a number of factors — have only continued to ascend, leaving a mark on the balance sheets of shippers around the world.
As we continue our march into 2022 — a year that promises more challenges for shippers and transportation companies alike — it’s ok if moving your containerized loads has started to intimidate you. Substantial rate increases and instability are bound to take a toll on your peace of mind as well as your budget.
But you’re not alone in questioning why container rates are continuing to rise or when/if they’ll fall once more. You’re not the only company with concerns about how to save money on these shipments or what alternative options are available to you.
Here at ATS International Services Inc. (a division of Anderson Trucking Service), our time in the international transportation world has left us with a well-rounded understanding of the factors that drive shipping prices — including the price of moving containerized cargo. And, although ATS International specializes primarily in breakbulk and Roll-on/Roll-off transport, our expertise extends beyond this realm.
As such, we’re confident in our ability to walk you through what’s going on in the containerized transport marketplace — a market we monitor every day.
Below, you’ll find an overview of the following:
- Why are container rates rising?
- How can you save money on your containerized freight?
- What are some alternative options that you could explore?
Understanding this information will help you navigate what has become an increasingly-impactful situation in the international marketplace. And, while there isn’t a one-size-fits-all solution for maximizing your transportation supply chain during this time, this article will help you locate yours.
Why Are Container Rates Rising?
According to data reported by FreightOS.com on March 20, 2020, the average weekly price for a 40’ container was $1,400. Nearly a year and a half later, on September 10, 2021, these per-container prices reached an all-time high of $11,109.
This change, representing a 693.5 percent increase over the span of only 18 months, is truly unprecedented. And, although prices have dropped slightly since September’s peak — resting near $10,000/container as of March 2022 — they show no sign of subsiding significantly. . . at least not anytime soon.
A price increase of this nature is enough to leave both shippers and transportation companies with questions as to how we got here. Answering these queries will take a quick look at how a number of factors have individually driven containerized freight rates to their current level.
Four factors that have affected container pricing worldwide are:
- A slow down in new container production
- A drop off in the total number of operating container vessels
- The heightened congestion at many ports
- Steady demand for container space
Collectively, these factors have created something of a “perfect storm” in the containerized transportation marketplace, driving up rates to match the inefficiencies therein.
#1: A Slow Down in New Container Production
To maintain efficiency and keep the containerized transportation space moving, container manufacturers must produce. Though the life expectancy of a container changes based on how well it's handled, how frequently it's used and a number of other variables, sea-faring containers rarely last more than 12 years on average.
For this reason, the pool of viable containers is constantly shrinking and unless manufacturers match this pace — at a minimum — eventually the demand for container space will outpace demand.
This is what we’ve seen in recent years.
Supply chain congestion, which has been mounting since before the onset of COVID-19, has impacted container manufacturers just like many other businesses — limiting their ability to produce the necessary replacement amount per year.
Additionally, in order to remain valid and capable of transporting cargo overseas, every container must be inspected and validated on a set schedule. According to rules established by the Convention for Safe Containers (CSC), these checks must be done routinely; 5 years after each container is introduced to the marketplace and once every 30 months thereafter.
However, due to pandemic-related labor shortages and the restrictive timelines of a congested supply chain, many containers weren’t able to be properly inspected and certified — decreasing the supply of viable containers further.
#2: A Drop Off in the Number Operating Container Vessels
Container manufacturing companies aren’t the only portion of this supply chain that has fallen behind schedule. Vessel manufacturers are also struggling to churn out new vessels as quickly as necessary. This process, which typically takes between 18 and 24 months to complete has seen its timeframe expand — due, in part, to labor shortages and shutdowns brought on by COVID-19.
As a result of fewer vessels to utilize, ocean carriers have had to reduce the number of ports they service recently. In turn, with fewer options on which “sailings” they utilize and less vessel space available, shippers have had to pay more to secure this capacity.
#3: Congestion at Many Ports
This third factor raising the price of containerized transportation internationally is perhaps the most impactful. You see, a large portion of ports — both in and out of the U.S. — have struggled with congestion.
Once a vessel reaches its port of entry, more troubles arise.
Blanketed port congestion — spurred by national truck driver shortages, labor shortages at the port, equipment shortages (chassis, trucks, trailers) — has been headline news recently. This congestion, although hard on all adjacent supply chains, has had a significant impact on the cost of containerized transport.
In a healthy market, containers move through international ports in 30 days or less. Today, exhaustive port congestion has lengthened this turn-around time substantially, making a timeframe of two months or more common.
This vast number of containers sitting at international ports removes yet another portion of container supply from the marketplace, increasing prices as a result.
#4: The Steady Demand for Container Space
As if these first three factors weren’t enough, demand for containers around the world isn’t helping things either. You see as the overall supply of 40 and 20-foot containers has significantly declined over the past few years, demand for their services has not.
In fact, in some portions of the world, consumerism has caused demand to increase over this period. And, in a market like international transportation where prices are greatly influenced by supply and demand, an inequity between the two causes rates to soar.
How Can You Save Money on Your Containerized Cargo?
Now that you understand some of the major factors driving your international freight rates, let’s talk about getting the most from your transportation dollars on these loads.
Honestly, there’s very little you can do about these extreme spot prices. That said, here are some things in your control that may help you shave some dollars off your rates:
Give Plenty of Lead Time
In the transportation industry, like many others, time is money. And, the more time you give your transportation provider to arrange your cargo’s journey, the better off you’ll be.
In a market like today’s — particularly for containerized cargo — urgency will raise your costs. That said, giving your freight forwarder notice weeks in advance will help them ensure you receive the most competitive rate possible. We all know in today’s world time is money, so short notice may happen thus the sooner you get your provider involved the better.
Be Flexible With Your Timelines
Rigidity in a time of uncertainty is always harmful to a shipping budget. You see, transportation companies are constantly looking to maximize their time — particularly in a tight market.
For this reason, shipments that provide little flexibility on pick-up date/time, transit route, voyage date/time and delivery date/time are harder to service.
In the planning of your comprehensive transport concept (which outlines your shipment’s journey from start to finish), your international partner will need some flexibility to prevent unnecessary price hikes.
As such, try to avoid rigid date/time windows. Instead, communicate with your consignee to work out wider timeframes for your provider to work within. Although it may seem like an inconvenience, or shoddy service on their behalf, giving your international transportation company a bit of flexibility can save you significantly.
Be Open to Alternative Port Locations
Sometimes international shippers, for one reason or another, prefer to utilize a single, tried-and-true route for their cargo. In such a challenging marketplace, though, this isn’t necessarily recommended.
Instead, we’d urge you to be open to alternative port locations. If your transportation provider recommends the usage of a different port than you’d otherwise use, this is likely for good reason. Ask them about their reasoning for this change. If they’re able to tell you the benefit of using this new port — be it a discounted price, less congestion, or otherwise — it may be worth considering.
At the end of the day, your international provider’s job is to plan out your cargo’s best-fit route. Sometimes this route requires using a different port — even if it’s not the closest one to your origin.
What Are Your Alternatives to Containerized Transportation?
By and large, cargo sent in a container is done so for a reason; there aren’t many alternatives for sending loose/boxed commodities.
As such, retail and general merchandise goods have few choices for alternative transport methods. Shippers that move these kinds of goods regularly may want to consider purchasing a container instead of renting in today's market.
For other types of cargo, like manufacturing and construction products (which can easily be transferred to a flatrack container or mafi trailer) roll-on/roll-off (RO/RO) transportation may be an alternative worth considering.
RO/RO vessels provide shippers the same cargo protection as a container would offer them and often have plenty of capacity to fill with each sailing. As such, if you’re interested in an alternative to containerized transportation add RO/RO to your shortlist.
Add a Great Freight Forwarder To Your Network
Look, the current state of the international transportation market is enough to make even the most seasoned shipper wary. Without a network of great providers in your corner, it can be nearly impossible to navigate these twists and turns.
On top of this, with so many companies to choose from, selecting your right-fit provider from the field is far from simple. ATS International is here to help you get this right.
Check out this article, The Pros and Cons of Using a Freight Forwarder (+ How to Choose Yours) for an overview of what to consider when selecting your next partnership.
Getting this process right can make a huge impact on every one of your international transportation decisions and customer relationships from here on.
Finally, here at ATS International, we take pride in our ability to develop comprehensive transport concepts catered to each company’s unique needs. If you would like to try us for your next shipment, or simply need some advice on this crazy market, don’t hesitate to reach out.