The cost to ship a standard 40-foot container of toys, auto parts or other goods from Shanghai to New York has jumped to nearly $10,000, fueling frustration among importers and prompting some experts to say the market is in a bubble. The Drewry World Container Index’s spot rate for such a shipment hit $9,387 on July 11. That is more than double the rate from February but still below the peak of $16,000 early in the pandemic when it swelled due to spree buying by homebound consumers.
Industry experts attribute the bulk of the run-up in off-contract shipping prices to Yemen’s Houthi rebels’ missile and drone attacks that have forced ships to avoid the Suez Canal trade shortcut. The alternative route around Africa takes longer, so fleets need more ships to move the same amount of cargo. This causes shortages, schedule disruptions and delays that drive up costs for sea transport that handles about 80% of international trade volume.
USA retailers and other shippers have responded by bringing in goods earlier. This quickly made rates much more expensive in the busy “peak” season for importing back-to-school, Halloween and Christmas merchandise. “It is a bubble and it will eventually pop,” Simon Heaney, senior manager for container research at Drewry, said of container rates.
Customers polled by the consultancy expect prices to fall in the first half of next year, Heaney said. Meanwhile, the speed and magnitude of the increase has customers and industry experts asking whether market dynamics justify current rates. And some customers who remember the last round of inflation-driving ocean shipping costs worry that there are more increases ahead.
“There’s never transparency about what’s actually driving it, only assumptions. What’s the rhyme or reason?” said Greg Davidson, CEO of Lalo, which sells stylish infant high chairs online and through Pottery Barn Kids stores.
