The COVID 19 pandemic has ushered in some unprecedented changes all over the world. At the start of the pandemic, everyone thought that freight charges will either decrease or remain unaffected. After all, the global economy had suffered a massive downturn with lockdowns in force all over the world. Hence, it was logical to assume that trade would decrease as well.
However, e-commerce sales increased at a massive rate as people stuck at home continued to order consumer goods from all over the world.
Chinese Sea Trade
This unprecedented increase in consumer demand was a whole lot stronger than anyone had anticipated. As orders started coming in, exporters realized they did not have the shipping capacity to fulfill all their orders. Empty containers became a much-prized commodity as companies tried to dispatch their assignments abroad, as soon as possible.
Such high costs also had been a ripple effect on export orders. On the other hand, importers could not simply pass on these massive charges to their customers. In some cases, costs have surged by over 700 percent. Such staggering amounts have led to a huge increase in prices for the end consumer, in many cases.
For example, a single 20 feet container arriving from China to Pakistan used to cost $700. Now the same container is worth $2500 to $3000 or so. The situation is the same for many other destinations all over the world.
The Key Reasons behind this Surge
The Pandemic-induced lockdowns meant that ports all over the world had to close down or work at subpar capacity. This led to a backlog of fully loaded shipping containers waiting for their turn to offload their cargo.
Moreover, there were also capacity constraints as trucks and railway carriages were not available to transport the goods from the ports to their respective destinations. In some cases, Christmas decorations were offloaded at their destinations in late February!
A lot of empty containers remained stranded at the ports because there was no manpower available to load them back on the ships. This increased container load cycles substantially, and they were not available in places where they were critically needed.
Apart from the above, a massive logjam in the Suez Canalled to its near-complete blockage. Many container ships were left stranded, leading to further disruptions all across the container supply chain.
All of this resulted in record high freight charges. No sector remained unaffected, and the tire industry felt the brunt as well.
The impact on the vehicle tire sector
High freight costs are also a big reason due to which tire prices have been rising at a steady rate. However, the Suez Canal is now open for business as are most major ports of the world. Slowly but surely, the freight industry’s charges are also stabilizing along with the rest of the global economy. This has had a domino effect on the other commodities that are directly impacted by freight charges. In the coming months, we expect that freight charges will return to their pre-pandemic levels and thus further help stabilize tire prices as well.
