Ocean Freight VS. COVID-19: Update

Covid 19 has greatly affected freight, from air-freight prices skyrocketing to reduced ocean freight capacity.

 Uneeda brings in hundreds of containers from overseas annually, and we continuously stay on top of the Transpacific cargo market.

So what is happening?

With the initial hit of COVID, air-freight capacity was reduced as about 40% of air freight is moved via commercial airliners.

 As airlines canceled flights, they removed air-cargo capacity. This has since recovered a bit, but we are still seeing elevated air-freight rates.

The vast majority of material is transported by ocean freight, which has been affected by COVID-related issues as well.

When demand for ocean freight decreases, the carriers remove some ships from service and cancel the sailings. This is called a “Blank Sailing.” This reduces the capacity, which keeps rates high as supply lowers to meet the lower demand. It also means fewer ships on certain routes, so cost and lead times increase.

 There were a significant number of blank sailings in March, April and May which reduced the capacity coming eastbound into the US. This is expected to continue through July.

There was also a large push to prioritize PPE which took up additional space. This ultimately lead to a backlog of containers in Asia, extending shipping times.

Now, we are seeing carriers push for General Rate Increases to re-coup profits from canceled sailings. There is also a push to implement Peak-Season Surcharges as early as June 15. Combined, this could cause increases of over $1,000 per container in June alone.

In the short term, we expect to see reduced capacity and increased cost related to ocean-freight for at least June and July. Carriers are continuing to keep the ocean-freight capacity low to keep profits higher and combat the slowdown in global shipping.

What does this mean for our customers?

You should continue to plan far in advance on orders coming from overseas. As we always advise, it is better to have your material waiting at Uneeda for you ahead of time than for you to run out.

No matter what happens with ocean freight, we stand by the prices we quote and you will not need to worry about fluctuations in the market.

Once you submit a PO to Uneeda you are locked in on price. We urge customers to monitor their inventory and plan well in advance so that we can make sure material is here before it is needed. We make sure anything in our pipeline is scheduled properly;  mitigating any chance of cost increase or delays.  

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