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Year-End Export Surge: Accelerating Shipments to Avoid "Container & Freight Rate" Issues

January, 17 2022

The fourth quarter (Q4) of every year is the peak season for exports, as businesses rush to deliver goods in time for the New Year holiday. However, this year is even more challenging because shipments must be expedited even further due to the upcoming Chinese New Year holiday. This has intensified competition for container space, leading to higher freight rates and increased port congestion at key destinations such as the U.S..

Ms. Khwannapa Phiw-nin, Director of the Department of International Trade Promotion (DITP) in Los Angeles, U.S., stated that importers and exporters are facing serious challenges regarding year-end deliveries.

• The primary concern is not just rising freight costs, but also the difficulty in securing vessel space.
• Port congestion has led to increased loading/unloading times, extending shipping durations from Thailand to the U.S. to approximately two months, instead of the usual one month.
• Exporters must plan shipments far in advance to ensure timely delivery for peak holiday seasons like Christmas and New Year.

Why Are Ports So Congested?

The main reason for port congestion is China's rush to export goods before the Chinese New Year holiday (February 1, 2022). Since China accounts for 80% of global container usage, the increased demand has caused:

• Severe port congestion at major international hubs.
• Limited vessel space for exporters in Southeast Asia.
• Extended delivery timelines for shipments to the U.S. and Europe.

However, after the Chinese New Year, port congestion is expected to ease, and shipping capacity may return to normal levels.

Expert Insights on Freight Rate Trends

1. Mr. Khongrit Chantharik, Executive Director of the Thai National Shippers' Council (TNSC), reported that:

   • Over 100 cargo vessels are currently stuck at U.S. ports due to congestion.
   • Importers have delayed new orders as they struggle to clear backlogged shipments.
   • Freight rates have increased by an average of $100 per container, though actual costs vary by route.

2. Mr. Wisit Limlurcha, Vice Chairman of the Thai Chamber of Commerce & President of the Food Industry Group at the Federation of Thai Industries (FTI), stated that:

   • Freight rates will remain high until January 2022 due to China’s pre-holiday export rush.
   • The container shortage in the U.S. is worsening, as many remain stranded at American ports.
   • Work-from-home policies in the U.S. have slowed port operations, leading to prolonged vessel wait times.

Future Considerations

Exporters must closely monitor freight rate trends and shipping delays as they plan for early 2022. Key concerns include:

• The strength of U.S. consumer demand in 2022.
• Freight costs, which may surpass the value of goods for certain exports.
• The risk of importers shifting to domestic production due to high shipping costs.

While weaker Thai Baht may help offset rising freight costs, exporters must remain vigilant and adjust their logistics strategies accordingly.