As globalization continues to increase, the cost of transporting worldwide also continues to grow. Here are five reasons for this:
- Increase in population: access to goods and services
As the global population rises, there is an ever-increasing demand for goods and services which is placing pressure on the shipping sector. Consumer spending has increased despite rising inflation, outpacing wage growth. As a result, the shipping industry must keep making investments in new ships and facilities to keep up with the escalating demand.
A few of the obstacles facing expansion are the South China Sea, Piracy in the Malacca Straits and the Gulf of Guinea, environmental concerns resulting in emission reduction, new International Maritime Organization (IMO) laws, and fuel and labour shortages.
- Economic Growth
The need for shipping services has increased as a result of economic expansion in developing nations. Because supply networks have become increasingly important, and it is necessary to move items fast and effectively, ocean freight costs have increased significantly and shipping companies are finding it challenging to meet demand.
- The rising cost of fuel
The recent increase in fuel prices has had an impact on every aspect of the global economy, from transportation expenses to supply chains. Ocean freight, which transports almost 90% of all commodities globally, has been one of the most severely impacted industries. Due to manpower shortages, residual impacts of lockdowns, and trade imbalances between the East and West economies, the cost of delivering products by sea has virtually tripled in the last year.
Delays can quickly result in lost revenue, which is especially troublesome for companies that rely on just-in-time supply chains. Although air freight is still an option for products that must be delivered quickly, it is often far more expensive than the ocean freight.
In response, while some companies have shifted to alternate modes of transportation like rail and the road, others are concentrating on boosting productivity and cutting waste throughout their supply chains.
- The rules and regulations for the shipping industry are becoming strict
Regulators have been scrutinizing the shipping sector more closely in recent years. This is due in part to the growing importance of supply networks and the harmful consequences that ocean freight has on the environment.
Thus, regulations controlling the shipping sector are getting stricter. Recent updates to the International Maritime Organization’s (IMO) rules on dangerous commodities’ transportation, harmful antifouling methods, and emissions reductions have been published. Compliance increases the cost of shipping.
- An Increase in Labour Costs
The demands of workers have risen in recent years as they look for better pay and working conditions and as a result, labour costs have increased significantly. Additionally, there is a severe labour shortage as a result of pandemic-related resignations. The situation is worsened by the fact that companies are already having trouble keeping up with the rising cost of raw materials. Maintaining profit margins is becoming harder and harder for companies.
For all these reasons, International shipping costs will continue to increase well into the future.
- Posted by WiserTech Solutions
- On October 7, 2022