Residents leaving UAE face high freight charges as shipping costs rocket

Logistics experts report a shortage of shipping containers owing to the disruption caused by the pandemic

UAE residents who plan to return to their home countries have been told they face high freight charges because shipping costs have increased in the past year, with further rises anticipated.

The price of shipping a six-metre container to the UK is now more than four times higher than it was 12 months ago, logistics experts said.

They said the Covid-19 pandemic affected the supply of shipping tankers and caused a manufacturing boom as pent-up consumer demand soared, pushing charges to a historic high.

The knock-on effect is likely to be felt by consumers as prices increase, particularly in the UAE, where many goods are imported.

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There is a lack of available containers because of the huge bottlenecks in China, which has seven of the top 10 largest shipping ports in the world
Matt Stanley, commodities broker at Starfuels

Families looking to return home will be hit hard.

“Last September a 20-foot container from the UAE to London in the UK would cost around $700, now it is closer to $3,000,” said Simone Percy, managing director of Dasa International Movers in Dubai Investments Park.

“It is basic supply and demand, and everyone has been sitting at home for a year ordering online and that has created a backlog for shipping companies who have put their prices up.”

A ship charter rate index reported by German company Harper Petersen and Co showed costs were seven times higher compared with the rate in June 2020.

Instead of using shipping routes as a unit of analysis, the index weights average daily charter rates across eight size classes of vessels.

DUBAI, UNITED ARAB EMIRATES. 29 APRIL 2020. 
Simone Percy, MD of DASA International Movers. 

Moving companies are preparing for a busy period as people who have lost jobs look to leave the country, they warn against using unqualified moving companies who exploited vulnerable families leaving Dubai during the global financial crash.

(Photo: Reem Mohammed/The National)

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To ship a 12-metre container from Shanghai to Los Angeles 12 months ago would have cost less than $2,000. Now the price is closer to $14,000.

Before the pandemic began, it would take ports between 24 and 48 hours to process a shipping vessel, but it now takes five times as long.

In some ports, there are 30 ships waiting to dock because of the backlog.

“Generally, the industry will not expect to see a softening of shipping rates until the end of this year,” Ms Percy said.

“It will impact everyone and likely push up the cost of goods.

"Some people looking to move back home from the UAE will have to decide if it is worth paying these fees to send items back with them.

“Other problems are getting into ports as they are overloaded. We’ve been told delivery trucks are full sending goods to shops, so there is not much space for personal effects.”

The Ever Given container vessel blocked the Suez Canal for six days in March, causing major disruption to the industry. The incident had a significant effect on trade between Europe, Asia and the Middle East.

“These shipping channels are ageing systems, but still hugely important,” said Matt Stanley, a senior commodity broker at Starfuels in Dubai.

“The biggest ancillary cost on any shipping tanker is fuel.

“In a market that is still recovering, operators are now paying double in fuel to what they were paying 15 months ago.

"There is a lack of available containers because of the huge bottlenecks in China, which has seven of the top 10 largest shipping ports in the world.

“When major cities get locked down, huge numbers of containers are shut in and can’t go anywhere.”

A lack of manpower and pandemic-enforced restrictions in major Chinese manufacturing centres such as Guangzhou and Guangdong increased the pressure on the industry.

Jebel Ali is the largest port in the Middle East, so any disruption is felt in the UAE – a major commercial entry point for the region.

Container prices from Singapore to Dubai have soared from $1,200 in 2016 to about $7,000 today, Mr Stanley said.

“We are still in a pandemic, just learning to deal with it,” he said.

“As so many things are made in China, that means a lot of everyday goods will go up in price.

“If Shanghai and Beijing are locked down entirely, that will have a huge impact on the global recovery.

“Shipping prices could easily go up another 20 to 30 per cent.”

Crude oil carriers, container ships and dry dock cargo ships have all been affected.

Taekwon Kim, commercial general manager at Oman Shipping Company, said basic supply and demand was fuelling the increase in prices to transport goods around the world.

“Costs of container ships and dry dock cargo ships have increased sharply in a short time because of the demand,” he said.

“But crude oil carriers remain a low market.

“Container ships only just broke even in recent years, but now there is huge demand.

“The panic demand for cargo has driven prices up and unbalanced the situation. Shipping companies are making huge money as a result."

The 'Ever Given' leaving the Suez Canal - in pictures

Updated: August 17th 2021, 3:00 AM
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