International logistics has been highly impacted by the health crisis caused by Covid-19 causing major global congestion and exorbitant prices. Prices – especially international freight – exceeded 500% increase to importers, in addition to the lack of equipment, spaces on ships, reduction in free time and delays generated by the unavailability of labor due to isolation.
Gradually the market was resuming shipments and prices were reduced, however, are still far from the prices charged in the pre-pandemic period.
With the war between Russia and Ukraine, the market again became a mess generating unforeseen events and insecurity for some routes.
There are several factors that cause sometimes sudden changes in the international logistics scenario. In view of this, the importer and exporter should be attentive and up-to-date on events and trends in the short and long term to avoid surprises in their business.
All this information allows an analysis of likely scenarios that foreign trade will face in the coming semester. After all, doing risk management is directly linked to the ability to simulate logistics costs and delivery times.
What factors impact the value of international freight?
With the latest events in the world it is possible to perceive the fragility that surrounds international logistics. Approximately 90% of global transport takes place by sea, this shows how significant the impact on the logistics chain that depends on this modal.
In the last 3 years, foreign trade professionals have had to deal with situations never before imagined. However, it is clear, therefore, the unpredictability in the area and the skills that these professionals must have to deal with it.
The pandemic was certainly the most unexpected situation and required adaptability, patience and a lot of strategy for decision-making in the face of the difficulties faced.
Lack of containers, workers’ health, closed ports or operational reduction by safety measures, priority in the transport of medicines and uncertainties in consumption have generated insecurity, costs and delays never seen before.
The strike is another factor to be considered and occurs suddenly and without enough time for the company to be able to carry out its planning with demand.
Problems related to climate and political situations also impact the logistics scenario.
Costs due to exchange rate oscillation or even fuel should also be considered.
In view of this, companies need to establish a basic risk management of their operation recounting different scenarios that can generate high impact on their business.
Learn more about the current international freight landscape
It is difficult to predict future events, and the best way to deal with this unpredictability in international freight is to rely on the facts that have already occurred and know how to act in different ways in order to impact as little as possible in its operation.
The forecasts that can be established are based on what is currently living or at least with short-term visibility.
Some events are already more frequent, in these cases it becomes more likely to consider them as a possible risk point in your planning.
Read more: Instability in the international freight market: scenario for 2022/2023
Factors such as strikes, seasonal peaks, climate and health crises can cause ship congestion.
Congestion has been a constant stone in the shoe of sea shipments over the past two years, as China’s ports have faced many periods of lockdown. The most rigid of them happened at the Port of Shanghai and affected more than 300 vessels.
Another recent fact that we could observe in 2022 was the stranding of the Evergreen ship in the Suez Canal, which impacted about 400 ships and basically “messed up” logistics for several months to come, resulting in stopover delays.
Omission of Ports
The omission of ports occurs mainly when the operational cost of docking is higher than the service offered at that given port.
This way the shipowner chooses to unload his cargo at another port so that it follows another ship.
The lack of structure in some ports operating with smaller ships also causes this type of problem. Especially if the ship is too loaded, when then it is necessary to unload in other places not to take risks.
Moreover, the climate is predominant in this type of decision, because the risks of breakdowns are very high.
Fuel price inflation
Regardless of modal, price increases in international freight can occur due to fuel inflation.
When it comes to maritime modal, this can happen even with cargo already in transit, since cargo on board ships and long haul are subject to the application of extra fees such as the bunker surcharge, which is a surcharge related to the oscillation of fuel. This value is quoted in dollars and varies according to the international market.
What are the prospects for international freight in the next period?
Some companies such as large retailers still have high inventory of goods, this ends up slowing the international market and providing more supply of ships than demand for spaces, consequently reducing the price of international freight.
This has been seen recently with the disproportionate and absurd increase in values, which is in the end of the day passed on to the final consumer.
According to comexstat data, in the years 2020 to 2022 there was growth in shipments for maritime, air and road modals in import.
With the pandemic also grew the demand for ships and so many are being built with forecast to enter the market between 2023 and 2024.
More ships on the market may result in a reduction in prices, but it is important to remember that the market ends up influencing the prices charged. After all, if they’re paying a high price, there’s no reason to reduce it.
One option for the lack of container is to use the NOR (Reefer off), it ends up being cheaper than the Dry, but with the internal space a little reduced due to its structure (engine).
Another factor to analyze is related to the route x lead time: in some cases a better price is achieved on routes with higher lead time. If the load is not urgent it is an alternative to operate with cost reduction.
During the pandemic, the air modal was an alternative for many companies that were unable to operate with the seafarer due to the constant delays. Especially in the electronics and medicines industry.
It should be taken into account, however, that freight on commercial aircraft may lose boarding due to priority for luggage. The cargo plane has a more agreed boarding schedule, but with higher costs.
In relation to the prices charged, they are established by the rules of the IATA (International Air Transport Association).
Road modal movements exceeded US$ 9 billion in imports and US$ 14 billion in 2022 in Mercosur.
Uruguay has approached Asia with new trade agreements, ignoring some dealings with Mercosur, so that the relationship with the country may change in the future.
However, the prospect is for growth in the block causing an increase and investment in this modal.
Currently, international freight prices are operating in a fall and experts predict a more favorable market for logistics in 2023 with regard to costs.
Cheap2Ship platform simplifies your hiring of international freight
Faced with so many variables, applying tools available in the market that automate processes and assist in decision making is fundamental to the success of the operation.
Cheap2Ship is an online digital platform that focuses all your international freight quotes from any modal in one place.
Your service providers will launch on the platform the prices for your quotations according to the information previously provided by you such as: origin, destination, product etc. In this case you can see all the information received in a standardized way.
In addition, you can view the lowest proposals and other shipping conditions without having to analyze various files sent by email. The tool also has chat and send the accepted via platform, providing greater control and compliance in your operations.
International freight and insurance make up the tax calculation base, so having a tool that assists in decision making will bring, in addition to agility, cost reduction and assertiveness for your business.