Box rate difference between small and large shippers approaching $ 20,000 per fire
The crippling container shipping costs that hit smaller shippers have been analyzed by Danish consultancy Sea-Intelligence, making it clear why so many exporters are on the verge of bankruptcy thanks to this year’s record freight rates.
The price differential between the smaller cash freight shippers and the larger contract shippers continues to widen. The spread was $ 10,000 per fire four months ago, but is now approaching $ 20,000.
Taking as an example goods inside a fire valued at $ 25,000, data from Sea-Intelligence in its latest weekly report shows the share of freight costs in relation to the value of the cargo. A large shipper with fixed line contracts will typically pay freight charges of up to 18% of the value of the box’s cargo, up from 5% before the pandemic.
However, the small shipper, suffering the vagaries of the soaring spot market, saw its freight costs explode from 7% to 62%.
The current freight crisis shifts competitiveness between shippers
By calculating the impact on overall profitability, assuming both shippers have a 20% profit margin excluding freight costs, Sea-Intelligence shows that for this comparatively lower value commodity, the larger contract shippers essentially see their profits reduced to zero, but small shippers see their profits turn into losses, the magnitude of which far exceeds previous profits. In the Sea-Intelligence model, released yesterday, a one-time shipper will see a net loss of $ 10,000, on a shipment worth $ 25,000 in today’s environment of extremely high spot freight rates.
“[T]he current freight crisis is shifting competitiveness between shippers. In turn, this also means that the crisis is a clear competitive positioning opportunity for some shippers, ”Sea-Intelligence said.
The plight of small shippers carrying low value goods who are excluded from the market due to high shipping costs and limited availability of boxes has been well documented in recent months.
Talk with Splash Last month, James Hookham, director of the Global Shippers Forum, said: “The killer for many small businesses will be the pressure on their cash flow as they will have to pay higher shipping bills before they have a chance to. renegotiate their contracts with larger clients. Companies die when they run out of cash and not because they have no more goods to sell ”.
While there have been signs of a spot rate cap in recent weeks, many analysts are warning that it will take several months for prices to really cool down.
“Despite the drop in rates, congestion and demand are expected to keep delays and high rates a reality not only until the end of this year, but possibly until the end of 2022 as well,” Judah warned. Levine, head of research at the Global Freight Platform. Freight.