This year’s transportation crisis parallels the energy crisis and, to one degree or another, is affecting almost the entire planet. Container shortages and prohibitively high freight prices have driven up shipping costs at times, sometimes by orders of magnitude. In recent months, this has been compounded by problems with airfreight, which has reached record highs. The immediate cause is the approach of Christmas, but the process as a whole is protracted, and there is no reason to expect a return to pre-crisis prices in the future.

Why Shipping Costs Are Rising

In recent months, the cost of freight on international cargo flights connecting China on one side and North America and Europe on the other has nearly doubled. For example, the cost of a parcel on the Shanghai – U.S. airports route has reached $14 per 1 kg against $8 in August this year. Similar shipments from Hong Kong to the U.S. and Canada will cost $12, from Hong Kong to Europe $8, and from Frankfurt to North America $5.5.

All of these rates broke relevant records from the spring of 2020, when the transportation crisis due to the epidemic hit for the first time. Rates then were as high as $12 per kg. By comparison, before the beginning of last year, rates were holding fairly steady, rarely exceeding $2 per 1 kg on transatlantic routes and $4 per 1 kg on China-Europe and China-North America routes.

Now prices have soared due to a surge in demand for small goods before Christmas. The U.S., Canada and Western Europe are shopping for holiday gifts. Consequently, electronics, clothing, and other consumer goods are flying off the shelves. However, we are not only talking about consumer goods, but also industrial goods such as semiconductors and even car parts.

As The Financial Times notes, the situation has worsened due to the emergence of a new coronavirus strain, Omicron. Panic has caused the public and health organizations to rush to buy up masks, respirators and tests. Much of this is made in China, where shipping rates are now highest.

The increase in seasonal demand coincided with another problem: for a long time, a significant portion (up to half) of air cargo shipments were provided by passenger liners, which found room in their holds for small shipments like smartphones or microchips. But that is not the case now. The volume of passenger traffic has not recovered to the pre-crisis level, and the remaining passenger airline fleet is mainly used for tourist flights: there are far fewer business flights. Tourist destinations and traffic flows do not always coincide, unlike business passengers. For a while many airlines converted their planes into cargo planes, but after the elimination of lockdowns the tourist hunger brought the liners back into the passenger industry.

Finally, the global air cargo fleet itself has shrunk, with total capacity down 13% from 2019. At the same time, freight demand grew by 6%. Thus, the gap between supply and demand was more than a solid 20% – enough to raise fares many times over.

Why Not Enough Containers for Transportation
After all, the lion’s share of the world’s goods (almost 90%) is transported by sea. But in the last year maritime transport has experienced an even more severe crisis. Freight rates on the busiest routes like Shanghai – Rotterdam jumped 10 times compared to the beginning of 2020. The average freight cost for a 40-foot container reached $11,000 per voyage. Towards the end of the year, the rates decreased slightly (by about 15%), but are still several times higher than normal. This is a much more serious price increase than for the vast majority of goods and services, given that there are now virtually no industries that have not been affected by inflation.

Many factors also played a role here. After global demand recovered by the end of 2020, China, the world’s largest exporter, got rid of all of its container stocks, which had already started to accumulate in U.S. ports. However, the U.S. exports far fewer goods that require large containers, and port disruptions (primarily on America’s west coast) have made it doubly difficult to get them back. In 2021, for every 100 containers bound for the U.S., only 40 arrived in the opposite direction. The U.S. administration has made considerable efforts to clear its port facilities of excess capacity, but the success so far has been modest. Only about 11% of the world’s existing containers are now stuck in ports, and 600 ships are on the roads, unable to load or unload in time.