The outbreak of the unprecedented situation caused by the Covid-19 virus has put almost all the sectors of the economy out of gear. Even the shipping industry is experiencing a strong downturn.

The changes in consumption and shopping patterns activated by the pandemic, including a surge in electronic commerce followed by lockdown measures have in fact led to a hike in import demand for the manufactured consumer goods, a large part of which is moved in shipping containers.

As per the Import Export Data, freight rates have reached historic heights during Covid-19. Further with the lessening of lockdown measures and varying speed recovery all across the globe, and stimulus packages supporting the demand of the consumer, inventory building and frontloading in the apprehension of the new Covid-19 wave, led to a further surge in containerized trade flows.

The skyrocketing freight rates are the result of factors – increasing demand, shortage of containers, saturated ports, and too few ships and dock workers. All these aspects have contributed to the squeeze on the transportation capacity on every freight path. Furthermore, the recent Covid-19 outbreaks in Asian export hubs like China have made the matters worse.

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Because of such a huge surge at the retail level, vendors are faced with choices – halt the trade, raise prices or absorb the cost to pass it on later all of which would effectively mean more costly goods. Higher freight rates are more painful for the companies that move clunky, low-valued items like furniture and toys.

Companies are trying their best to work around the higher costs. Some have stopped exporting to certain locations while others have started exploring for goods or raw materials from nearer locations. The longer this high shipping freight rate lasts, the more companies will take constructive measures to shorten their supply chains.

Some European firms are resorting to extreme measures like using truck convoys to get products including bikes, scooters, and automotive parts from China. With the end of lockdown there will be a shift in the consumer demand to services from goods, however, the higher shipping costs persist with ongoing shipping disturbance and the producers are willing to pass on these higher costs to the end-users.

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