Shipping costs from China are going through the roof

Since the beginning of the year, we’ve had a worldwide chip shortage that increased the price of components, followed by long lead times. My Twitter feed is often filled with complaints of expensive components (e.g. STM32 being 10 times more expensive), and ever-increasing lead times of up to two years.

But lockdowns and some governments paying people to stay home have completely messed up the supply chain, and with China having reopened a long time ago, many containers are shipping with products from China, only to return half-empty, or not at all.  This behavior can be seen in the US trade deficit that almost doubled in the last year or so, and freight rates have gone through the roof for a while, but especially in the recent weeks/months.


China shipping costs
Source: Bloomberg via Twitter

The chart above shows a container rate of over $10,000 for a 40-foot box from just around $2,000 for years, or just over $4,000 in Q1 2021, and one commenter on Twitter said it’s now over $20,000. I tried with a freight cost calculator (Freightos) and I was given an $11k to $19k price range between Shanghai and New York.

Freight cost china USATaking the worst-case scenario into account that’s ten times more expensive than a little over a year ago. The higher shipping freight cost may not directly impact the shipping fees from online retailers like Aliexpress or Banggood, as most of the products are sent by air, even for low-cost shipping options with a 4-6 week delivery time with pricing having increased by around 1.5 times. Having said that if air freight demand increases following the shipping costs increase, it may eventually have a more severe impact on all shipping options.

Feel free to comment if this has already impacted you. Some price hikes are often temporary or “transitory”,  but building new containers and ships do take time, and there may not be a quick fix.

[Post updated regarding consequences to Chinese retailers like Aliexpress or Banggood]

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