The ‘Perfect Storm’ – Why the Cost of Shipping is on the Rise Again

As a business owner, one of the best things I believe you can do for your clients and industry stakeholders, is to be as open and transparent as possible, especially when explaining price rises.

It’s no secret that the cost of shipping has risen recently – with the increase being felt by both businesses and consumers – but many people outside the industry might not realise the reason why.

Unfortunately, the supply chain has been dealing with a ‘perfect storm’ of conditions in recent months, that is now resulting in increased prices.

While 12 months ago we were watching freight rates plummet, it’s been a different story this year, and largely due to issues outside of the industry’s control.

Two key factors have been the ongoing tensions in the Red Sea, and the industrial action at DP World Container terminals – which was only resolved in recent weeks.

Both issues have seen shipping times increase and vessel schedules change, with the delays adding extra costs and having to be factored into the overall price of goods.

Of course, resolving industrial action at container terminals is welcome, however there are still residual delays as the backlog of containers are cleared. Meanwhile, ongoing re-routing and detours away from the Red Sea are continuing to increase transit times.

In the current economic climate, we know businesses simply cannot afford to absorb price increases, and so it’s the end consumer who pays.

Much like a standard basket of grocery items has increased significantly in the past 12 months, so too has the standard list of supply chain fees and charges;

  • Freight Rates: 2023 saw a significant drop in freight rates from the extreme highs of the pandemic years. Prices are rising again as capacity becomes tighter across all trade lanes, and as a result of longer transit times due to tensions in the Red Sea. However, it’s worth noting that while freight rates are rising, they’re still much lower than peak-pandemic days.
  • Terminal Access Charges: Some ports have increased terminal access charged by up to 50%, as ports look to make infrastructure investments, such as adding or replacing cranes at major terminals.
  • Landside Charges: Other landside charges – such as trucking costs – have also increased, with some operators adding additional fees as a result of delays caused by ongoing industrial action.
  • ETS Charges: The European Union’s Emissions Trading Scheme came into effect on January 1, which has resulted in a surcharge being introduced for all shipments to and from the European Economic Area (EEA).
  • Detention Fees: Shipping lines traditionally only allow 7-10 days for containers to be returned before charging fees, however this can be difficult in an environment of delays and backlogs caused by outside factors. Added to this, detention fees can be charged even if containers are held up by customs and quarantine inspections.

Detention costs are especially frustrating, with the ACCC’s most recent stevedoring monitoring report once again noting cargo owners in Australia currently don’t have adequate protection against unreasonable detention practices.

The ACCC is again calling for reform in relation to detention fees, which is something we’ve also been flagging as a major concern for some time.

But how many times does the ACCC have to make that recommendation before action is taken?

The recent issues in the industry again highlight the need for efficiency measures to be introduced across the supply chain, which would help ease some of the current congestion and delays.

It was only late last year that we were warning the underlying issues within the supply-chain still haven’t been addressed and when the next disruptive event occurred, we would see the same problems emerge.

Here we are again, and once again, it will be the consumer who pays the ultimate price.