High Shipping Rates On Trans-Pacific Route Hits East African Region

The East African region is grappling with a shortage of shipping containers as ship operators shift their vessels to the trans-pacific route where there is a lucrative business.

The lucrative rates on the route, where spot rates including premiums can top $20,000 per forty-foot equivalent unit, has seen carriers pull ships from Asia-Middle East and Asia-Africa, putting them into the trans-Pacific trade.

The ripple effect has been a serious shortage of containers to the region, which has created a scarcity of some goods leading to exorbitant prices.

The rising cost of goods has been occasioned by a sharp rise in shipping charges that have more than doubled since last year.

Supply-chain experts say the high rates leave many shippers, particularly those with relatively low-value goods, with an option of paying a premium for containers and passing on the cost to their customers or retreat from overseas markets.

As more ships take the trans-pacific route, huge congestion has been reported, piling pressure on the little available containers.

According to freight Wave news, there are over 60 container ships full of import cargo stuck offshore of Los Angeles and Long Beach. In China, 154 vessels have been waiting to load export cargo off Shanghai and Ningbo as of Friday last week.

Locally, there have been reports that China is paying handsomely for the return of empty containers, a move that the Kenya Association of Manufacturers (KAM) says is making it attractive to vessel owners to return the empties at the expense of export goods.

“This has resulted in cargo ships scrambling for empty containers from the diverse ports in order to transport them back to China. It results in exports goods lacking space on cargo ships, as ships are allocating space to empty containers,” KAM chief executive is quoted by the Star Newspaper.

The cost of moving containers in the region has gone up to between $3,500 and $4,500 up from between $1,800 and $2,200.

Experts believe that market will correct itself because of the current imbalance as the rates on the routes where the ships have pulled out will go up, attracting the vessels back.

In Kenya, freighters are feeling the impact as they contend with delays in deliveries of goods to their customers because of the prevailing container shortage globally.

The move has seen consumers wait longer for their deliveries to be made even as they cope with the high cost of goods that are in tandem with the increasing shipping fees.

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