Why Is Shipping From China So Expensive? Understanding the Challenges and Finding Solutions

Introduction: The Rising Costs of Shipping from China

In recent years, businesses and individuals importing goods from China have faced a significant challenge: skyrocketing shipping costs. The dramatic increase in expenses has left many wondering, "Why is shipping from China so expensive?" To put this into perspective, shipping costs from China increased by a staggering 360% in the past year alone, severely impacting companies that rely on moving goods across borders.

This surge in shipping expenses is not just a minor inconvenience; it's a major obstacle for businesses of all sizes. Let's delve into the key factors contributing to this price hike:

• Increased shipping demand
• Container shortages
• Global supply chain disruptions
• Ongoing trade tensions

In this comprehensive article, we'll explore these factors in detail, examine the current state of shipping from China, and offer practical solutions to help businesses navigate these challenging times. We'll also discuss how digital logistics platforms like FreightAmigo can play a crucial role in optimizing your shipping strategies and reducing costs.

Understanding the Freight Puzzle: Key Players and Processes

Before we dive into the specific reasons behind the high costs, it's essential to understand the key players and processes involved in shipping goods from China. This knowledge will help you make more informed decisions and potentially find ways to reduce your shipping expenses.

Freight Forwarders vs. Freight Brokers

Two important entities in the shipping process are freight forwarders and freight brokers. Understanding the difference between these two can help you make better choices for your shipping needs:

Freight Forwarders:

• Arrange the shipping of freight for their customers
• Move goods from one country to another
• Handle shipments through customs at each location
• Perform assembly and consolidation services
• Book cargo space directly with ocean or air providers
• Negotiate rates for transport

Freight Brokers:

• Purchase rates from carriers and mark them up
• Consolidate multiple customers' smaller shipments into one large shipment
• May work with other brokers, potentially increasing costs

Pro tip: To potentially reduce costs, consider working directly with a freight forwarder rather than going through a broker. This can help eliminate additional markups and streamline your shipping process.

The Freight Process: From Pick-up to Delivery

Understanding the entire shipping process can help you identify potential areas for cost savings and efficiency improvements. Here's a breakdown of the typical freight process:

1. Export Haulage: Moving items from the shipper's location to the freight forwarder's warehouse
2. Items Checkpoint: Freight forwarders check received goods for any issues
3. Export Customs Clearance: Customs brokers submit cargo details and required documents for clearance in the country of origin
4. Import Customs Clearance: Authorities in the destination country check import customs documents (can begin before cargo arrives)
5. Destination Arrival and Handling: Freight forwarders receive all cargo documents and handle various processes upon arrival
6. Import Haulage: Transporting cargo from the warehouse to the final destination

By familiarizing yourself with these steps, you can better anticipate potential delays or additional costs that may arise during the shipping process.

Factors Contributing to High Shipping Costs from China

Several interrelated factors have contributed to the dramatic increase in shipping costs from China. Let's examine each of these in detail:

1. Global Imbalances and Increased Demand

The COVID-19 pandemic has created significant imbalances in global trade. As countries locked down and reopened at different times, production and demand fluctuated wildly. This, coupled with a surge in eCommerce and online shopping, has led to unprecedented demand for shipping services. The increased demand, combined with limited capacity, has pushed shipping prices to new heights.

2. Container Shortages

One of the most significant factors driving up shipping costs is the severe shortage of shipping containers. This scarcity is reflected in the price of containers:

• Early 2020: $1,800 per unit
• Late 2020: $2,500 per unit
• Current price: $3,500 per unit

This container shortage has created a situation where demand far exceeds supply, leading to skyrocketing shipping costs.

3. Port Congestion and Closures

Major ports in both China and the United States have experienced significant congestion and occasional closures due to COVID-19 outbreaks and increased shipping volume. This has resulted in:

• Shipment delays of up to 30 days in some cases
• Increased dwell loading times (up 122% in the last two weeks)
• Increased dwell departure times (up 242% in the last two weeks)

These delays and congestion issues have further contributed to rising shipping costs.

4. Limited Alternatives to Ocean Freight

While there are some alternatives for high-value products, such as air or rail freight, these options are limited and often more expensive. The lack of viable alternatives for most goods has put additional pressure on ocean freight, driving up prices.

5. US-China Trade Tensions

The ongoing trade tensions between the United States and China have also played a role in increasing shipping costs. While China has lowered its average tariffs on imports from the rest of the world (from 8.0% in early 2018 to 6.1% in early 2021), the United States has increased its average tariffs on imports from 2.2% to 3.0% over the same period. These changes in tariffs have added complexity and cost to the shipping process.

Current Shipping Price Spikes: A Closer Look

To fully grasp the extent of the current shipping cost crisis, let's examine some specific data points:

• Asia-US West Coast prices: $18,425/FEU (Forty-Foot Equivalent Unit)
  • 50% increase in the last month
  • 503% higher than the same time last year
• Asia-US East Coast prices: $19,943/FEU
  • 30% increase in the last four weeks
  • 475% higher than rates for this week last year

These dramatic price increases highlight the severity of the current situation and the urgent need for businesses to find ways to mitigate these rising costs.

Strategies to Mitigate High Shipping Costs

While the current shipping landscape presents significant challenges, there are several strategies that businesses can employ to help reduce costs and improve efficiency:

1. Plan Ahead and Book Early

One of the most effective ways to avoid price spikes and secure space for your goods is to plan and book your shipments well in advance. We recommend:

• At least 7 days for air freight
• 2-4 weeks for ocean freight

By booking early, you can often secure better rates and ensure that your goods have a spot on the vessel or aircraft.

2. Improve Communication with Shippers

Regular and transparent communication with your shippers is crucial. Stay informed about any potential delays, holds, or storage issues that may affect your shipment. This proactive approach can help you avoid unexpected costs and adjust your plans accordingly.

3. Split Your Shipments

Consider diversifying your shipping methods to spread risk and potentially reduce costs. For example:

• Ship smaller goods and quantities by air
• Use ocean freight for larger items

This strategy can provide more flexibility and help you avoid putting all your eggs in one basket.

4. Implement a Pre-order System

Allowing customers to pre-order products can help you plan your shipping needs more accurately. This approach can reduce the risk of surprise delays or shipping price surges by giving you more time to arrange cost-effective shipping solutions.

5. Invest in Cargo Insurance

While it may seem counterintuitive to add an expense, cargo insurance can be a game-changer in protecting your business from potential losses. With cargo theft and loss estimates ranging from $10 billion to $30 billion annually, insurance provides a crucial safety net.

6. Optimize Your Shipping Volume

While small and medium-sized businesses may not have the shipping volume of major corporations, there are still ways to optimize your volume:

• Consolidate shipments when possible
• Consider partnering with other businesses to increase collective shipping volume
• Explore options for Less than Container Load (LCL) shipping for smaller quantities

7. Stay Informed About Market Conditions

Keep yourself updated on the latest trends and developments in the shipping industry. This knowledge can help you make more informed decisions and anticipate potential challenges or opportunities.

How FreightAmigo Can Help Navigate These Challenges

In these challenging times, having a reliable partner in the logistics industry can make all the difference. FreightAmigo, as a full-service, one-stop digital supply chain finance platform, offers several solutions to help businesses overcome the current shipping cost crisis:

1. Comprehensive Freight Quote Comparison

FreightAmigo allows you to compare door-to-door freight quotes for various shipping methods, including:

• International courier
• Airfreight
• Sea freight
• Rail freight
• Trucking solutions

This feature enables you to find the most cost-effective shipping option for your specific needs, potentially saving you money in the face of rising costs.

2. Real-time Shipment Tracking

With FreightAmigo, you can track your shipment status anytime, anywhere. Our platform connects with more than 1000 reputable airlines and shipping lines, providing you with up-to-date information on your cargo's location and status. This real-time tracking can help you proactively address any delays or issues, potentially avoiding additional costs.

3. One-Stop Solution for Customs Clearance, Insurance, and Trade Finance

FreightAmigo simplifies the complex process of international shipping by offering a one-stop solution for:

• Customs clearance
• Cargo insurance
• Trade finance

By streamlining these services, FreightAmigo can help reduce the overall cost and complexity of your shipping operations.

4. Automated Shipment Documentation

Our platform automates the creation and management of shipment documents, reducing the risk of errors and delays that could lead to additional costs. This feature can be particularly valuable in navigating the complex documentation requirements often associated with international shipping.

5. 24/7 Expert Support

FreightAmigo provides round-the-clock support from logistics experts. This continuous support can be crucial in quickly resolving issues, answering questions, and providing guidance on how to navigate the current shipping challenges effectively.

6. Leveraging Technology for Optimal Solutions

FreightAmigo combines artificial intelligence, big data, FreighTech, FinTech, InsurTech, and GreenTech on one platform. This technological integration allows us to offer innovative solutions that can help businesses adapt to the changing logistics landscape and find ways to mitigate rising costs.

Conclusion: Navigating the Stormy Seas of International Shipping

The current state of shipping from China presents significant challenges for businesses of all sizes. The combination of increased demand, container shortages, port congestion, and global trade imbalances has created a perfect storm of rising costs and logistical hurdles.

However, by understanding the factors at play and implementing strategic approaches to shipping, businesses can navigate these choppy waters more effectively. From planning ahead and optimizing shipping methods to leveraging digital platforms like FreightAmigo, there are numerous ways to mitigate the impact of high shipping costs.

As we look to the future, it's clear that adaptability and innovation will be key to success in the global shipping industry. By staying informed, being proactive, and partnering with forward-thinking logistics providers, businesses can not only weather the current storm but also position themselves for success in the evolving landscape of international trade.

At FreightAmigo, we're committed to helping our clients transform and redefine their logistics experience. By combining cutting-edge technology with comprehensive logistics solutions, we aim to provide a hassle-free and enjoyable shipping experience, even in the face of industry-wide challenges.

As you navigate the complexities of shipping from China, remember that you don't have to face these challenges alone. With the right strategies, tools, and partners, you can turn these obstacles into opportunities for growth and optimization in your supply chain.