After High Freight Rates, Road Logistic Disruptions Hampering the Supply Chain Across US and Europe
- Journalist: Harold Finch
Since the beginning of the year, high freight costs have been the major concern that has disrupted the smooth shipments across the entire supply chains. Since petrochemical sector is heavily dependent on trade, it has been facing uncertainty in demand supply pattern, firstly, due to the winter storm in North America, then Suez blockage, followed by the container shortages in European region and a recent port congestion in Asian region mainly in China.
Amidst the shipping stress, a significant jump in land logistics rates have also been observed in last 3-4 months, particularly in the European and US region. Major cause behind the spike has been the unavailability of truck drivers to move containers from one place to another which has resulted in overflowing of warehouses and port congestions.
As per various market participants, ports have been jammed with containers, and they are dealing with dual problems where first trucks need to take containers out of the port and then bring the empty container back. This has pressurized the whole land logistics system as there are not enough trucks to do both tasks. According to transport intelligence and shipping consultant agencies, truck companies are reluctant in driving the empty containers back as that seems to reduce their profit margins. Along with that, shortage of truck drivers has been a prickly challenge, the shortage became prominent when quarantining the truck drivers became a stringent restriction to control the pandemic last year.
Land logistics rose by more than 7% from Q1 of 2017 to Q1 of 2021 in the European region. Freight, on the other hand, has been gaining since the beginning of the year where it has increased by whopping 130% from average price of USD 6384/FEU in early 2021 to USD 14764/FEU as per the last week freight charges for 40 feet containers sailing from Asia to Europe.
Trade from Europe to North America has also become costly since early 2nd quarter of 2021. An increase by a staggering 159% has been witnessed where average price of USD 3573/FEU in the beginning of the April 2021 to USD 9268/FEU as per the last week freight charges for 40 feet containers destined to North America from Europe.
As per ChemAnalyst, “Long term outlook appears to be grim where a reduction in charges is unlikely this year, as freight charges are on the rise, particular for containers from Asia to Europe and Europe to North American region".