Distributors face significant challenges
The shipping cost has shown an upward trend since last summer as a result of the global Covid-19 pandemic. The distribution of disinfectants and household articles has rapidly increased in the last year. The shipping container shortage continues to grow worse every day. People in the industry predict that this situation will not be resolved in the first half of this year.
Data from the Baltic Exchange shows that between 2019 and 2020 the shipping cost for transport from China to the west coast and the east coast of North America increased by 208% and 110% respectively. The shipping cost between Asia and Europe increased as well. In December alone shipping cost from China to northern Europe increased by 60%. The shipping cost to Rotterdam increased nearly sixfold in one year.
The shipping capacity continues to decline, while the shipping price remains high. The shipping price of some international shipping companies increased so much, especially after October, that profit margins have become very small. The cost price of transport grows, while the overall price remains the same, which puts a lot of pressure on companies. As a result, some companies will face bankruptcy this year.
Although the majority of trade still takes place as usual, there are two growing problems in the distribution industry. First, shipping capacity declines, which pushes the shipping price up. Second, companies are running out of buffer capital to deal with unexpectedly high shipping costs, which will affect operations.