Should We Prepare For High Rates As The New Normal?

Freight and ancillary costs, across many trades and transport modes, have continued to be much higher than they were in previous years. This makes us wonder whether it is time to consider these rate levels as the new normal.

The Asia market, to both Europe and North America, has undoubtedly been the most affected with rates spiralling in the past two years. We had hoped that this Chinese New Year would act as a circuit breaker, but early indications are that not much has changed.

Of course, there are many supply factors that contribute to the high rate levels, which are sometimes regional. These include port congestion, equipment turnaround and schedule disruption. For example, Northern China is currently experiencing a higher degree of equipment shortages and therefore rates are significantly higher than the rest of China.

Demand may also impact rates levels as we move forward in the months to come, these include a lack of low value product volumes, alternative sourcing and inflation.

It’s not just Asia though. The North American market is heavily impacted by port and warehousing congestion, and this looks likely to be around for some time.

European trade has its own supply and demand issues, while also struggling with the ongoing impact of the UK’s exit from the European Union, which of course is not going to be undone any time soon.

Then there is Covid, which has been the catalyst for the global supply chain disruption that we have witnessed, and this has led to the increase in pricing levels.

However, even as the world starts to live with the pandemic, it is impossible to see everything returning back to pre-covid levels in the next couple of years, if at all. To hang on to a hope of significant rate reductions in the short to medium term is almost certainly a flawed business strategy.

At Westbound we are certainly moving forwards and planning around the expectation that the current high rate levels have become the new normal.

At Westbound Logistics we pride ourselves in offering personalised and tailored logistics solutions. To find out more please call 01375 800800 or email info@westboundglobal.com.