In April 2024, the sudden increase in shipping costs caused trouble and losses to many customers. The following are four main reasons for i concluded at this situation:

1. Houthi Armed Forces Impact in Red Sea
   Due to the long-term impact of the Houthi armed crisis in the Red Sea on European and American routes, many ships have to choose to detour through longer African routes in order to ensure that the goods arrive at the destination port smoothly and intact. The number of ships on the African route has therefore increased suddenly, resulting in abnormal congestion at the transit port. Some ships cannot enter the port, while other ships that have transited cannot leave in time. This situation has caused a large number of containers to be stranded at the transit port and unable to return to the original port in time, causing a serious shortage of containers at the port of departure. In order to solve this problem, shipping companies can only maintain operations and ensure the safety of goods by increasing freight rates.
2. Brazil Adds Tariffs on China’s EVs
   Brazil plans to impose additional tariffs on China’s new energy vehicles in the future, resulting in a number of automakers, including BYD, building new energy vehicle factories in Brazil. It is estimated that BYD will need to use more than 20,000 containers to transport equipment and materials. This large-scale transportation demand has led to tight shipping capacity. At the same time, in order to avoid future tariffs, many car companies shipped a large number of goods to the South American market in advance without actual orders. Data shows that electric vehicle companies have occupied a large amount of shipping resources, resulting in insufficient capacity on other routes. In order to win these large orders, many shipping companies have withdrawn ships running to West Africa and turned to focus on the South American line, which has led to a shortage of ships on the West African route and a significant increase in overall freight rates. In addition, new energy vehicles not only occupy ships, but also cause the yards of the destination ports to be filled with a large number of cars.
3. Future U.S. Tariffs on Chinese Exports
   Due to the imminent US election, the US government announced that it would impose a 50-60% tariff on goods exported from China to the United States. This news has triggered Chinese companies to increase their investment in South America. At the same time, local importers in the United States have stocked up in advance to avoid high tariffs, resulting in an early peak in shipping demand. This situation has made shipping resources more tense and further pushed up freight rates.
4. Shipping Companies Raise Prices Opportunistically
   Driven by the above factors, several major shipping giants saw the opportunity and took the initiative to jointly raise prices, further exacerbating the plight of importers and exporters. This price increase has forced many businesses to bear high freight costs, resulting in a significant increase in business costs.

How to Respond? Countermeasures Available?
In order to help customers better cope with the current predicament, we provide the following suggestions:

1. Plan ahead and prepare backup plans
   Export companies need to plan ahead and prepare two shipping plans. As containers are in short supply now and the estimated time of arrival (ETA) is unstable, instead of paying a high price and waiting for containers, it is better to consider sending the goods that customers urgently need by air or express delivery, so as to seize the market opportunity and gain market share.
2. Order planning
   Before placing an order, companies need to make a plan to identify which products are inventory products that can be shipped by sea after freight rates stabilize, and which products are promotional products that are only suitable for promotional activities for one or two weeks. Factories need to cooperate with customers to complete production as quickly as possible and deliver the goods to customers by land and air DDU or DDP before the event starts.

DDU (Delivered Duty Unpaid): The seller delivers the goods to the buyer at the designated destination without going through import procedures or unloading the goods from the means of transport for delivery, and the delivery is completed.
DDP (Delivered Duty Paid): The seller is responsible for transporting the goods from the place of departure to the designated destination in the importing country stipulated in the contract, and the goods are actually delivered to the buyer before the delivery is completed.

3. Call for industry change
   We sincerely hope that some conscientious companies can change the current shipping situation. Here, we sincerely call on technology and capital giants like Musk and Buffett to pay attention to this industry and see how to change the rules of the game so that the goods of buyers and sellers can serve everyone in need as simply and conveniently as local express delivery.

I hope these suggestions can help you deal with the current difficulties more smoothly. If you have any questions or need further help, please feel free to contact us (Meiji Lighting)-www.kdshine.com. We will wholeheartedly provide you with support and solutions.