Q&A with the CEO: The Rise of Shipping Costs
Shipping costs continue to increase rapidly, and this has become a sore point for many importers and exporters, and ultimately impacts businesses and economies.
We chatted with TSI Central Station’s CEO, Clifford Blackburn, to get his take on shipping costs.
Q: What are the main drivers behind the increasing shipping costs?
There are different versions of why, the most explainable is the imbalanced (too many imports into the USA and not enough exports) caused by lockdown. Shipping lines parking or repairing vessels, so many ships were taken out of service. That may have been the case, but the shipping lines have capitalized on the world weak moment, I can understand that the rates need to increase but the levels they are going to you (yes, they increase every 15 days) and added to this they use “peak” season and any other excuse to increase the rate they do. Here is a fact, in January 2021, the cost to ship a 40-foot (12 meter) container from China to South Africa cost in the region of $1000 to $1500, the same container size and weight will now cost you between $10’500 and $12’000. You don’t need to be a rocket scientist to know that will affect the sale to price to the man on the street and affect the profit margin that would have been made by the importer. The importer in many cases has contracted to a specific rate and can’t increase the selling price. I am distraught and can’t believe that no one can do anything about it. I have no doubt that at some point a government (like the USA) will do something. Locally I see a service provider has chartered a ship, this will create competition and I hope more and more people will do this, this will teach the price fixing shipping lines a lesson.
Q: What can importers and exporters do to reduce their shipping costs?
The only way that you can start to reduce the shipping costs is to start bringing in less goods, so only bring in exactly what you need (use LCL) less than a container load, this is more cost effective. Use non-operating reefers (NOR) these are cheaper, but the downside is that the deck is ridged, and the volume is less (capacity). We ordered 10 and at the last minute they cancelled the order due to everyone jumping on the bandwagon. We are working day and night finding solutions for our clients; we will overcome this
Q: When do you think we can expect to see the costs going down again (if ever) and what will make these rates come down/remain stagnant?
I don’t see anything happening until the end of 2022, beginning of 2023, we will never see rates as we did prior to Covid but they must come down. Maybe using non containerized vessels is the way to go, the way they did it before the introduction of containers. It does mean crating goods (not great for the environment) but let’s keep thinking and we will come up with a solution.
Q: How can businesses use technology to reduce or better manage their shipping costs?
All businesses cannot afford NOT to use technology, from deciding the amount of product to bring in, the size of container/s and the sweet spot in terms of pricing. Also, who wouldn’t want to have a whole team of experts doing your logistics for you and all visible through our unique platform.