Market Overview – Asia to the USA
Because of the world’s reaction to Covid19, US domestic & international shipping has certainly been turned upside down these past six months.
Particularly out of Asia, significant price increases and less predictable service have added greatly to the complexity of today’s global supply chain. Prices are up 60% from just two months ago. Moreover, prices will go higher; after all, 60% of all US retail sales occur between October and December. The overall root cause of these increases is multi-faceted. But, in simplest terms, there are two major drivers:
The global network of ships, containers and ports is incredibly stressed. The world's container market is 34 million containers, moving on 5,000 ships, through 200 major ports. When businesses stop shipping worldwide, for any significant period of time, this maximized network must be scaled down and adjusted. All of this translates to less consistency of space, containers, and ships, as the carriers determine what logistics formulas will work going forward.
Home retail delivery services such as Amazon Prime, Wayfair, ect. have become very popular; these services require high-speed direct and guaranteed shipping, which is a very different model from traditional shipping.
The difference in fast transit/fast delivery versus the traditional services can be as much as a 40-day difference in delivery. However, carriers are marketing and getting price increases on normal “slower ship” services options too. Container guarantees, ship guarantees, and transit guarantees have become even more important.
The shipping industry has lost big money for years. Forty years ago, there were forty-five container ship companies serving the Pacific. One by one, they either went out of business or were absorbed by the competition. Now there are only ten carriers.
Those ten companies offer many thousands of sailings a week, carrying hundreds of thousands of containers. These containers systematically flow from/to millions of origins & destinations. Paradoxically, carriers' ability to up their service is now higher than ever. And, so far, the shipping public seems more than willing to pay more for what they deemed as a given just a few month ago.
