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Cost Of Containers, Freight Have Increased On The Back Of Covid-19

22 July 2021 – The cost of freight containers, rental costs and shipping freight rates have increased as a result of the Covid-19 pandemic, says container freight company Container Intermodal Trading (CIT) CEO and co-founder Kashief Schroeder.

He adds that the price of shipping containers, however, needs to be adjusted as they are significantly undervalued as a trading commodity and it is positive that container factories are realising their worth in the global logistics market.

Containers age and need to be replaced with new ones and container manufacturers play a pivotal part at the start of the intermodal process.

“When the initial cost of a container goes up, it causes a chain reaction whereby the price of shipping commodities also increases,” says Kashief.

One of the challenges facing the consumer is that the initial role container manufacturers play in the global scheme means they have a huge influence on the cost of shipping.

“The prediction is that there will be a levelling out of the cost around the end of 2021, but as long as the demand for containers remains strong, that is far more likely to be the first quarter of 2022. The downside is that, as consumers, we are left to shoulder the increase,” he says.

The leasing terms of second-hand containers are also impacted, as the price of new containers directly determines what the cost of second-hand prices are going to be.

“This inevitably leads to a global increase in price. Compared to last year when a new 20-foot general purpose shipping or freight container was about $2 100, this year’s price is more than $3 700 per container.

“When the capital outlay to purchase a second-hand container is higher owing to the original owners needing to cover their cost, companies like CIT are forced to increase rental rates to cover the increase,” says Schroeder.

Further, shipping lines were placed in a position where they needed to claw back the additional costs of the containers by renegotiating freight rates. Many of these lines have leveraged their necessity and begun running at half their capacity for a far superior freight rate.

“This has led to even some historically problematic shipping lines declaring a profit for the first time in decades. We see many shipping lines seizing the opportunity and capitalising on the necessity of their continued operation to the livelihoods of consumers and businesses alike,” says Schroeder.

“However, the danger is most severe for the small business entrepreneur and South African consumer, as we feel yet more financial pressure and are left to deal with the increasing cost of products we rely on.

“Structurally, these higher rates work better for the container manufacturers and shipping companies’ bottom lines, and they hold the power to increase these rates again going forward even if prices do equalise in 2022 as predicted,” he says.

It is an opportunity for South Africa to rethink its position, become more technically orientated, pour more resources into again becoming more manufacturing orientated and building a more diverse local economy that is not so reliant on imports for its survival, says Kashief.

“As our economy struggles under the strain from the pandemic, we should work together to consider longer-term strategies to help protect us from increased consumer debt and decreased consumer savings in the future. Invest in our local economy and become more conscious of what and how we consume to mitigate the price increases that are out of our control.” Source (Engineering News)