Consumers think twice about overseas purchases as air, sea freight rates soar

Ms Caitlyn Cheng, who has been shopping on e-commerce platform Taobao for about eight years, became more selective in her purchases after noticing a rise in shipping costs at the start of the year.

"I am paying about 30 per cent to 40 per cent more for shipping as a whole," said the 27-year-old technology analyst, whose purchases include clothes, household items and fashion accessories from China.

She has been opting for sea freight because it is cheaper than air freight, with the cost based on weight.

"I would definitely think twice now before purchasing any goods, especially expensive or bulky items," she added.

Earlier this month, freight forwarder vPost announced it was suspending its China sea freight service and all shipping services from Indonesia to Singapore from Aug 24 due to high freight costs.

Singapore Post, which runs vPost, said it tried to make shipping more affordable earlier this year, such as by having discounts for bundling multiple parcels.

But it said freight costs remained high even after it introduced a fuel surcharge last month that customers had to pay.

"Therefore, we have taken the difficult decision to suspend these services instead of passing the higher costs on to the customers," said a SingPost spokesman.

Mr Bernard Chan, director of freight forwarding service Penanshin Air Express, said shipping rates rose exponentially during the Covid-19 pandemic. For instance, the cost of shipping a twenty-foot container to Los Angeles by sea in 2021 shot up to about 10 times what it was in 2019. It is now four times the pre-Covid-19 rate.

According to online freight forwarder iContainers, it costs about $5,500 to ship a twenty-foot container from Singapore to Los Angeles today. Penanshin's rate for shipping a twenty-foot container to Shanghai in 2021 increased to about 15 times 2019's rate. It is now about five times the pre-Covid-19 rate.

Freight forwarding company The National Forwarder told The Sunday Times that air freight to Colombo last month was about three times the pre-Covid-19 rate.

The company's freight costs often fluctuate. At the start of this year, freight costs to major airports in China such as Shanghai and Qingdao were about double the pre-Covid-19 prices. Currently, they are about 2½ times pre-Covid-19 prices.

The company added that it would still have to mark up these prices to cover its operational costs and turn a profit.

Associate Professor Goh Puay Guan of the National University of Singapore Business School said higher freight rates can be attributed to demand outstripping supply. Shipping bottlenecks caused by factors like lockdowns, safe distancing measures in shipping ports and workers falling ill accentuated the problem, he added.

Higher fuel and labour costs have also pushed up prices, said Mr Divay Goel, chief investment officer of Prudent Shipping Investments, which advises financial services companies on maritime investments.

But some consumers are still willing to pay the higher air freight and sea freight rates.

"Purchasing items from overseas is still relatively cheaper than getting the items locally," said Ms Michelle Ng, who has been shopping on Taobao for almost a decade. Her purchases include fashion products and furniture for her new Build-To-Order flat.

The 32-year-old business manager now pays $1 to $1.50 extra per kilogram on Taobao for air shipments and about $10 extra for each cubic metre for sea shipments compared with pre-Covid-19 rates.

There may be a respite from high freight charges in the next few months, with experts expecting an improvement in the global supply chain situation.

Prof Goh said: "Bottlenecks in supply chains are starting to ease, while shipping and manufacturing capacities are gradually catching up with demand."

Associate Professor Yap Wei Yim, the head of Singapore University of Social Sciences' maritime management minor programme, said capacity management should also improve as shipping lines learn from dealing with these supply chain disruptions. But a return to pre-Covid-19 levels is unlikely to happen soon, with Prudent Shipping's Mr Goel expecting the stabilised rates to still be at least 10 per cent higher than pre-pandemic rates.