Freight Costs From China Continue to Escalate

Even at these prices, there’s still strong demand and long delays to get customer’s shipment out of China.

Some large retailers such as Amazon, Walmart and Home Depot are now contracting their own ships in order to save costs and avoid delays.  Other large brands are telling their customers not to expect any shipments soon.

This is coming about as China is nearing peak demand for the upcoming holiday season.

There’s no one reason for this huge spike in costs.  Covid, of course, has created much stronger demand for goods, while reducing labor at the ports.  Not as many containers (and ships) are being sent back to China, or they are not at full capacity.  Shipping companies have reduced the number of ships in service.

Add in the tariffs on Chinese goods and in some cases now the cost of freight is more than the cost of the goods themselves.

This will only increase the cost of retail goods in the US, while inflation is already creating less buying power for many consumers.  Or the goods will not be available at all.  This is also putting pressure on some Chinese factories that were already experiencing lower demand and canceled orders.

Importers will have no choice but to raise their prices even further to cover the higher freight costs.  Or, as in some cases, they are opting to not ship finished goods, paying to warehouse in China until freight costs return to more reasonable rates.

It remains to be seen how long these shipping costs will remain at these record levels.  But until they stabilize, look for higher prices at the check-out counter, or empty shelves.