Summary of the last 30 months
From early March 2020, pandemic related pressures caused drastically higher demand for medical consumables and other various consumer goods, leading to a subsequent increase in demand for ocean cargo and transportation. Costs for ocean cargo/transportation significantly increased, along with transit times due to the shortage of ocean containers and labor, slowing global port and transportation operations.
Costs and transit times for 40’ ocean containers, a common form of transport for critical medical supplies such as exam gloves, protective gowns, masks and many other related products increased significantly.
Data from Freightos.com
Current Situation/Future Outlook
Over the past 12-18 months, many wholesalers, health systems, governments and municipalities were sitting on an abundance of inventory, decreasing demand on manufacturers and ultimately leading to a decreased demand for international cargo. The broader consumer market ran a parallel path with major US/Global retailers slowing their purchases. Container rates are now down to 2-3x pre-pandemic costs. We anticipate this situation to continue, bottoming out at 1-2x pre-pandemic levels in the next 6 months.
Why does this matter?
With ocean freight rates decreasing, importers are receiving some relief in freight expense, but it doesn’t impact all items equally. Depending on the size and weight of the item, freight can vary from being insignificant to 40% or more of the price of the product. In general, this trend should slow the amount of freight surcharges and price increases that suppliers/distributors are requesting.
If you want to learn more, here are a couple recent articles on this topic.