A confluence of factors has turned the shipping industry on its head, leaving small and medium-sized businesses (SMBs) feeling pinched, according to a new report from the Global Trade Review.
Those factors include a global container imbalance, COVID-related port disruptions and a “still wobbly supply-demand curve” caused by economies recovering at different rates. As a result, SMBs have begun to find themselves priced out of trade.
The GTR points to the Drewry World Container Index, which measures the average price for a 40-foot shipping container. This month, the index reached an all-time high of $6,957, a 305.7 percent increase over last year. The increase is even greater for shipments between China and Europe. Send a container from Shanghai to Rotterdam and you’ll pay more than $11,000, a 534 percent hike compared to 2020.
“It’s just not viable,” said Pushkar Mukewar, CEO of digital trade finance company Drip Capital, which has studied how SMBs have been affected by these price surges.
Drip offers financing solutions such as supply chain or inventory finance to American SMB importers, as well as invoice discounting for firms in Mexico and India.
“We are hearing from agri-commodity exporters in India that they are simply going to avoid long-distance trade for now,” Mukewar told GTR. “Meanwhile, buyers in the U.S. are starting to look for alternative options, such as sourcing domestically or sourcing from geographies that are close by.”
It’s not just small shippers that are feeling the pressure. As PYMNTS reported in April, a combination of bad weather, the closure of the Suez Canal, staffing issues and port backlogs were hurting companies that had plenty of stimulus-rich customers and nothing to sell to them.
Forty-four percent of small businesses reported temporary shortages in March, while an April survey from the U.S. Census Bureau found supply chain disruptions in the wholesale manufacturing and construction industries.
COVID remains a thorn in the shippers’ sides, with new outbreaks earlier this month in China, Malaysia and Taiwan causing delays worldwide.