Ports account for around 90% of freight transport worldwide and export costs have skyrocketed. The Valencia Containerized Freight Index (VCFI), an index created by the Port Authority of Valencia to reflect the evolution of the export market rates for full containers by sea, shows that exporting is becoming more and more expensive. According to this index, costs increased by 2.09% in May compared to the previous month, accumulating growth of 375.13% since the beginning of the series in 2018. Exporting is almost four times more expensive than four years ago .
The causes of this rise in freight prices are multiple. The high demand of port traffic, the rise in the price of marine fuel and the congestion in some American and Asian ports marked last year and do so now. There is tension in maritime transport concentrated in few companies. Five large shipping companies, which are using all their ships with hardly any idle fleet, move the world and are the main responsible for container traffic. MSC, Maersk, CMA CGM, Cosco and Hapag-Lloyd control the three main shipping alliances that handle 80% of world traffic. And prices for freight have skyrocketed. Shipping companies appeal to the rise in fuel prices to justify the increase in freight costs. The price of fuel has tripled since 2020.
“It is possible that after the summer the logistical problems will increase again, due to new outbreaks of covid and a new rise in the price of energy, but it is also true that it will be necessary to see how the rise in interest rates affects, which in principle entails a reduction in investment and demand, so not as many ships will be needed as the demand for goods and services is reduced”, explains the general director of the association of internationalized companies Amec, Joan Tristany.
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In the port of Barcelona they recognize that currently “they work 24 hours a day on working days to speed up and facilitate the entry and exit of containers as much as possible, giving priority to the entry of full export containers that are scheduled to be shipped in less than seven days” .
An example of the tense situation this past week was the US decision to decongest the country’s freight ports, whose logistics activity has been at a half-rate for months due to the effects of the pandemic. A new law prohibits shipping companies whose ships are in US ports from rejecting “without sufficient reason” US customers who want to export their products, for example, to Asia, and regulates the rates that can be applied to them.
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Joe Bidenpresident of the United States, criticized the high rates and “unfair practices” of the transport companies and linked them directly to the high inflation that the country is experiencing, of 8.6% in May: “During the pandemic, these transport companies increased their prices in some cases up to 1,000%, and now many times they refuse to load US containers and return empty to Asia. This is costing farmers and our economy a lot of money,” the president said.
While shippers and shippers criticize the dominant positions of the large maritime operators, they allied with each other. MSC and Maersk combine efforts on major routes, with a fleet of 1,400 ships under the 2M Alliance. CMA CGM, Cosco and Evergreen join forces in Ocean Alliance Day6 with 352 ships. Hapag-Lloyd, ONE, Yang Ming LIne and HMM have been grouped under The Alliance. In the sector, it is feared that this period of high prices will lead to a new era of trade and that a good part of that extra profit will be redirected from shipping companies to companies in the field of logistics and distribution. The large shipping companies would then not only dominate the sea, they would also control the handling of cargo in terminals or the exploitation of intermodal services, until they encompass a complete concept of international freight transport. All this in few hands.