Ocean shipping costs, which have been growing strongly since 2020, hit a new high in the fourth quarter of 2021, putting pressure on the cost of consumer items like coffee and furniture around the world.

Container Prices Are Skyrocketing in the Last Quarter of 2021

In 2021, the cost of transporting a container of cargo along major trade lanes has more than quadrupled compared to the seasonal average over the last five years.

A confluence of factors like soaring demand, a shortage of containers, saturated ports, and too few ships and dock workers have contributed to the squeeze on transportation capacity on every ocean freight path.

Recent COVID-19 outbreaks in Asian export hubs like China, few alternatives to ocean shipping, and rising oil prices could all trigger further increase of shipping costs in the coming months.

Freight Cost Increases Are Threatening to Boost the Price of Consumer Goods

Although economists are still considering shipping costs as having a relatively minor impact on inflation, they now agree that the sharp increase in container prices over the past year could raise euro-area producer prices by as much as 2%.

With about 80% of all goods trade transported by sea, freight-cost increases are threatening to boost the price of almost any consumer goods, from coffee, toys, and sugar to car parts, anchovies, and furniture, compounding concerns in global markets already bracing for accelerating inflation.

According to a spokesperson for the European Shippers’ Council, at retail level, vendors are faced with three choices: halt trade, raise prices, or absorb the cost to pass it on later. However, all these would ultimately lead to more expensive goods.

The longer these extreme shipping freight rates last, the more companies will need to take structural measures to shorten their supply chains. In fact, very few companies will be able to absorb a 15% increase in total delivered costs for internationally traded products.

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