The cost of freight containers, rental costs and ocean freight rates have increased due to the Covid-19 pandemic, according to the CEO and co-founder of containerized freight company Container Intermodal Trading (CIT). Kashief Schroeder.
He adds that the price of shipping containers needs to be adjusted, however, as they are significantly undervalued as a commercial commodity and it is positive that container factories are realizing their value in the global logistics market.
Containers are getting old and need to be replaced with new ones, and container manufacturers play a central role at the start of the intermodal process.
âWhen the initial cost of a container increases, it causes a chain reaction whereby the price of the goods being shipped also increases,â Kashief explains.
One of the challenges facing the consumer is that the initial role container manufacturers play in the global system means that they have a huge influence on shipping costs.
âThe prediction is that there will be a stabilization in costs towards the end of 2021, but as long as container demand remains strong, it is much more likely to be the first quarter of 2022. The downside is that, as consumers, we have to shoulder the increase, âhe said.
The rental conditions for used containers are also impacted, because the price of new containers directly determines what the cost of used prices will be.
âThis inevitably leads to an overall price increase. Compared to last year, when a new 20-foot general-purpose shipping or freight container cost about $ 2,100, this year’s price is over $ 3,700 per container.
“When the down payment to buy a used container is higher due to the original owners having to cover their costs, companies like CIT are forced to increase rental rates to cover the increase.” , explains Schroeder.
In addition, shipping companies were placed in a position where they had to recoup the additional costs of containers by renegotiating freight rates. Many of these lines took advantage of their necessity and started operating at half capacity for a much higher freight rate.
âIt even led some historically problematic shipping companies to report a profit for the first time in decades. We see many shipping companies seizing the opportunity and capitalizing on the need to continue to operate for the livelihoods of consumers and businesses, âsaid Schroeder.
âHowever, the danger is greatest for the small entrepreneur and the South African consumer, as we feel even more financial pressure and have to deal with the rising cost of the products we rely on.
“Structurally, these higher rates work better for the bottom line of container manufacturers and shipping companies, and they have the power to increase these rates again in the future even if prices level out in 2022 as expected,” he said.
This is an opportunity for South Africa to rethink its position, to become more technically oriented, to devote more resources to becoming more manufacturing oriented again and to build a more diversified local economy that does not depend as much on imports for its survival, says Kashief.
âAs our economy grapples with the pressure of the pandemic, we must work together to consider longer-term strategies to help protect ourselves against rising consumer debt and shrinking consumer savings. consumers in the future. Invest in our local economy and become more aware of what we consume and how we consume to mitigate price increases that are beyond our control.