A Welcome Price Drop
The ocean is a giant “highway” of vessels moving containers of goods across the globe. During the pandemic and until recently there were significant price increases for overseas shipping, but global shipping costs are back down to pre-pandemic levels.
- Shipping a 40-foot container from China to a U.S. west coast port was down 93 percent from its high of $20,600 in September 2021.1 That’s roughly equal to February 2020. Shipping costs from China to U.S. east coast ports and to Europe have also decreased.
- Other global shipping routes have seen costs fall also: freight charges on Europe-to-U.S. routes dropped from highs of $16,000 to around $3,000.
This is welcome news, but will the trend last for corporate relocation?
NEI Global Relocation has advised clients since the start of the pandemic that companies' global mobility programs should remain prepared and flexible for the unexpected in such uncertain times. Today is no different.
What 2023 Could Bring
Issues that could threaten lower international shipping costs and fewer delays may include:
- Geo-Political Disruptions: The world has become more economically linked, and any military conflict can force the system to adapt in unpredictable ways including areas declared off-limits to shipping. Russia’s invasion of Ukraine could further disrupt global transport.
- China’s COVID Surge: This threatens to upset 2023 global supply chains again and could increase supply chain volatility. Three major ports across China have already experienced new supply chain delivery problems because of COVID and at the Port of Shanghai, the world’s number one container port, cancellations have increased.2
- Container Shipping Reliability: This will remain volatile in 2023 as a recent report found that global vessel schedule reliability had a 56.6 percent on time record in December – a huge improvement from 30 percent recorded earlier in 2022 – but the average on time was 74 percent in 2018 and 2019.3
- Rising Oil Costs: The shipping industry keeps a close eye on oil prices as fuel costs can correspond to 50 or 60 percent of a ship’s total operating costs, depending on vessel size. When oil prices/demand are on the rise and as China reopens after ending its Zero COVID policy, the shipping industry may pass those higher costs on to customers.
- Labor Shortage / Labor Strikes: Beyond finding moving crews / drivers, the global transportation infrastructure is under regular threat from labor strikes. 2022 saw many strikes at both air and seaports. The chances of new strikes disrupting supply chains in 2023 are high and there is pressure on employers to increase salaries with global inflation.
- West Coast Ports Avoidance: Cargo owners are seeking new supply-chain options and diversifying their port entry locations. Shippers continue to reroute to gulf and east coast ports, away from California, due to higher cost of transporting freight over land, labor disputes with dockworkers, and rail workers' unions causing uncertainty.
Despite these risks, some feel freight volatility and international freight shipping costs may continue to decrease. Dubai-based global logistics company DP World expects global freight rates to drop by a further 15 to 20 percent in 2023.
Relocation Assistance Risk Considerations
Given the potential risk factors detailed above, what does this mean for client companies and global relocation assistance?
Foremost, one should remember that:
- Potential rate increases could re-bound in 2023 if the recent, positive circumstances change; and
- Shipments could get delayed or re-routed to other ports, increasing time for one’s expected goods.
Companies need to continue to weigh the impact of potential, quickly changing rate increases and associated incremental costs of delayed shipments (e.g., temporary housing) on their budgets against the increased delays for relocating employees who could have to wait longer than expected for their goods should global supply chain disruptions arise.
If NEI is not managing your international shipments, we recommend:
- Remaining flexible on fluctuating rates due to swiftly changing economic conditions and budgeting for changing international container rates in your cost estimates.
- Working with the best partners to develop processes that include verification of all options, freight costs and that any increases or above average costs are genuine.
To be prepared for shipping costs to be fluid in the year ahead, set expectations with relocating employees and consider alternative policy considerations for shipping household goods internationally, if applicable.
NEI Guidance and Diligence
NEI continues to be diligent about client costs for every single move. Our Client Relations Managers will work with each client to discuss the most cost-effective international household goods shipping options available and considerations for providing a relocating employee a small allowance towards being without those goods due to a longer transit.
To proactively discuss various options with our clients that may assist them in reducing or avoiding costs, NEI constantly monitors market and economic conditions so talent goals can be met.
For more information on this situation going forward, please reach out to your NEI representative.
Sources: 1) Freightos; 2) SCNBC; 3) Sea-Intelligence’s “Global Liner Performance” Report.