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Increased Shipping Costs & Delays Are Compounding Supply Chain Issues

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The Global Container Index, which measures average shipping costs, has averaged $10,000 USD in August.  This is approximately four times the average experienced in both the summer of 2020, as many companies began their restocking efforts, as well as pre-pandemic in the summer of 2019.

Furthermore, the cost to ship to North America from China and East Asia is even higher:

  • China/East Asia to North America West Coast is $17,507 USD (return $934 USD)
  • China/East Asia to North America East Coast is $19,098 USD (return $946 USD)

These exceptionally high prices are partially due to several reasons, including:

  • The previously mentioned port closures and limitations due to COVID outbreaks in China and elsewhere.
  • Issues with weather and climate, such as typhoons and lower ship capacity due to low water levels earlier this year along seaways and rivers, such as the St. Lawrence.
  • Increased demand for goods from consumers, particularly in the U.S. due to stimulus cheques.
  • Increased demand for goods as companies look to restock.

Inventories and Manufacturing Costs

Recent Flexport data from earlier in the summer shows that the average timeline to get goods from a cargo-ready facility in China to a warehouse in North America has increased from less than 35 days pre-COVID to over 73 days, and this has certainly increased since then.  A large part of the delay is a shortage of shipping containers, trucks, drivers, trains, and ships.  These shortages are compounded by a glut of items that need to be shipped.

These supply chain issues will have the following impact on the economy and commercial real estate:

  • Increased demand for warehouse space in ports as shipments await ships, trucks, and trains.
  • Higher prices for the end-users, the consumer, as manufacturers, wholesalers, and retailers are forced to add these additional costs in the final product selling price.
  • Potential reduced economic activity due to:
    • Potential slowdowns in manufacturing as companies await supplies.
    • Potential reduced retail sales as retailers cannot sell product they do not have.

Potential reduced retail sales as consumers deal with higher prices.

For More Information, Please Contact:

Roelof van Dijk

Senior Director, National Research & Analytics | Canada

Toronto Downtown

As Senior Director, Research & Analytics | Canada, Roelof leads the strategy and operation of Colliers Canada Research, delivering market intelligence initiatives that give Colliers and its clients a competitive advantage. He focuses on developing a high-performance national research team that leverages Colliers’ best-in-class market intelligence to produce relevant insights on local and national market and industry trends that inform client decisions, address market needs and support Colliers’ growth strategies.

Roelof has 15 years of experience covering the Canadian commercial real estate market. Prior to his career in commercial real estate, he also worked as a project manager and urban planning consultant for residential developers across the Greater Toronto Area.

Roelof is regularly cited in national publications, such as The Globe & Mail, CBC News, Bloomberg, Reuters, Maclean’s Magazine and the National Post, as well as in local outlets across Canada.

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