Rent & Container Price Surge
July 15, 2021
As corporations compete for scarce distribution space to meet rising e-commerce demand, the warehouse market in the United States is starting to resemble the hot housing market.
As merchants and logistics providers scramble to relocate goods closer to population centers, industrial rents are rising, with some companies engaged in bidding wars for the most sought sites.
Container shipping costs from Asia to the United States and Europe are rising at an unprecedented rate as cargo owners compete for limited maritime transportation capacity, which shipping industry officials estimate to remain tight for the rest of the year.
Growing demand for China-made goods ahead of the holiday shopping season threatens to overburden container-shipping operations, putting cargo owners' hopes for relief from record ocean-freight costs to rest. According to the Freightos Baltic Index, daily rates from China to the US West Coast have increased by 66 percent since January and by more than 400 percent since the start of 2020. Over the same time periods, spot prices from Asia to Northern Europe have increased by 92 percent and 480 percent, respectively.
What can we conclude?
The soaring ocean rates are the result of supply chain disruptions that caused delays at ports and inland distribution networks as Western retailers and manufacturers scramble to replenish inventory depleted by the Covid-19 pandemic. With the end of the lockdowns, consumer demand began to rise, and interest rates began to rise.
Prices for logistics space near ports and cities, as well as big-box warehouses utilized in huge online fulfillment operations, are rising at a particularly rapid rate. The pandemic and lockdowns that forced many stores to close and people to stay at home boosted online sales, forcing merchants to accelerate investments in digital purchasing capabilities.
Finally, comes the question of whether you buy all you can right now or do you wait it out and hope for future capacity? In a recent poll of our audience, most people think that the Asia to North America shipping prices won't ease until sometime around Q3 of 2022.
MVP Logistics is here to answer all your questions about your supply chain and what steps to take to plan for and address the expected challenges. For an analysis of your supply chain, contact us virtually or give us a call at 1-888-390-5320.
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