Freight Rates Increase By 700% Worldwide, Pakistan Affected

Some experts believe freight charges may go back to pre-Covid levels in four to six months.

Port of Karachi.

The transportation cost of containerized cargo across the world, including Pakistan, has increased by up to 700%.

This is due to an abnormal growth in imports following the reopening of global economies from partial lockdown amid the Covid-19 pandemic.

The surge in international freight charges for the sea, rail, and air routes has offset the government’s positive impact on some imports during the pandemic. This may lead to imported inflation in the country.

The government may ask international shipping companies to rationalize freight charges during these testing times to control the situation.

Some experts believe freight charges may go back to pre-Covid levels in four to six months.

“Global freight charges have surged by up to 500-700% over the past couple of months,” said Malik Moin, the former Chairman of Pakistan International Freight Forwarders Association.

Freight charges for cargo in a 20-feet container arriving from China to Pakistan increased to $2,000-3,000 compared to around $700 in June 2020 and before, he said.

The abnormal growth in demand for the containerized cargo sent international freight charges soaring.

“Freight charges have surged crazily. I hadn’t seen such a big jump in rates over the past 25-30 years throughout the world,” remarked Moin.

Pakistan mainly imported cargo via the Far Eastern countries like Thailand, China, Hong Kong, and Singapore, he mentioned.

The Chairman of the Pakistan Ships Agents Association (PSAA), Mohammed Rajpar, said the pandemic had disrupted the cargo supply chain worldwide, which came to an almost complete standstill.

When countries reopened following lockdowns, they were almost empty as they had consumed all the goods imported during the pre-pandemic days.

Besides, the containers remained stuck in many countries due to lockdowns.

“The situation widened the gap between demand and supply (of imported cargo). The gap was filled by price equalizer,” he said.

The basic rule of economics suggests that once you have a shortage of something, the price goes up, so demand matches supply.

“It will take another six months before the situation normalizes,” he said.

“International freight charges have increased by 100-200% since December 2020,” Rajpar said. “They may fall over the next four to six months.”

He added the situation emerged post-Covid due to imbalances in the number of ships and the number of containers for global trade.

Covid-19 provided international shipping companies an opportunity to increase freight charges compared to the pre-pandemic times when they were running in losses.

“Shipping companies are overbooked now,” Moin said.

“Pakistan government is not responsible for the situation in international trade. Nor can it (alone) do anything to control it,” he lamented.

He stressed that there was no short-term solution for the government.

“In the long run, however, it should increase the number of shipping companies in Pakistan so that it could intervene.”

What are your views on this? Share with us in the comments below.

  • Featured Content⭐