Peak year-end exports, speed up delivery to avoid container and shipping costs

Accelerate delivery of goods to prevent container and shipping costs problems.

Exports in the fourth quarter of each year are considered the peak period because goods must be delivered in time for the New Year festival. But this year is more special than ever because goods deliveries must be “expedited” as a result of the upcoming Chinese New Year holiday.

This has resulted in a competition for container space, leading to an increase in freight rates and increased congestion at destination ports in major markets such as the United States.

Mrs. Kwannapha Phuwanil, Director of the Office of International Trade Promotion in Los Angeles, USA, said that importers and exporters have discussed the problems of delivering goods at the end of the year, which is not just about freight rates, which are higher. But what importers are worried about is not being able to find ship space and the problem of taking longer time to dock than usual, 1-2 weeks, but now it takes up to 3-4 weeks.

This means that the total travel time for a ship from Thailand to the United States will increase from approximately one month to two months, so all export companies must plan ahead to ensure delivery times are in time for high export periods, especially in the fourth quarter for Christmas and New Year.

The main reason for the port congestion is because China, the world’s largest exporter and user of 80% of the world’s containers, has rushed to deliver goods before factories in China close for the Chinese New Year (February 1, 2022). It is expected that after that, the congestion situation at the port “will ease”. In addition, the energy crisis in China has caused many factories to stop production, which may mean that there will be more space for ships to return to ASEAN as well.

In 2022, many factors still need to be considered, including demand for products in the United States, transportation costs, which are important factors, and this year Thailand also has the weaker baht to help. Otherwise, exporters of some products may face transportation costs that are “more expensive” than the product price, or may reach a point where importers see it as not worth it and turn to products produced domestically, causing changes in the supply chain system.

Mr. Kongrit Chantrik, Executive Director of the Thai National Shippers’ Council (TNSC), said that the rush to deliver goods from China before the Chinese New Year holiday will cause a backlog of goods from major ports in the United States. Since October, more than 100 ships have been backlogged.

Due to the congestion of the port, ships are unable to deliver goods and there are overdue storage costs of $100 per container per day. Importers are also delaying new orders because there are so many backlogs. At the same time, the high demand for containers has led to an average increase in freight rates of about $100 per container, but this depends on each shipping route.

Mr. Wisit Limluechao, Vice Chairman of the Thai Chamber of Commerce and Chairman of the Food Industry Club of the Federation of Thai Industries (FTI), said that the trend of freight rates will continue to be high until before the Chinese New Year in January 2022 because Chinese exporters have to rush to deliver goods before the long holiday during the Chinese New Year and have to rush to import goods to prepare for the country as well.

In addition, there are still many containers to the US due to the US using the Work from home system until the COVID situation has eased, but many employees have not returned to work. Although the economy has recovered and there are more imports, capacity is limited, so there are many ships waiting to transport goods at the port for a long time. As a result, transportation during this period has to face the problem of a shortage of ship space.

Information source: Prachachat Business Online

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