Rising gas and oil prices have hit the U.S economy hard. But like labor costs, the real impact of these prices on U.S. manufacturers can be deceptive.
As of this month, a London-based broker that tracks the shipping industry reports the daily cost of chartering a large cargo ship–the type used for transporting bulk materials–has increased from $60,000 per day a year ago to $227,000 in December 2007. Even for small packages, the costs of shipping internationally have outpaced domestic charges. A few examples from earlier this month:
• FedEx Corp. increased its surcharge for air-shipped packages from 16.5 percent to 17.5 percent. For ground-shipped packages, the surcharge rose from 5 percent to 5.25 percent.
• United Parcel Service hiked its ground shipping surcharge from 5 percent to 5.25 percent, while air and international surcharges went up from 16.5 percent to 17.5 percent.
• DHL hiked its surcharge to 19.5 percent for air and international shipments and 5.3 percent for ground shipping, from 18.5 percent and 5 percent, respectively.
Yes, freight costs have increased, but domestically, they have increased less. If your company primarily serves the domestic market, emphasize this point to your customers.
And it doesn’t look like global transportation costs will decrease anytime soon. In addition to fuel prices, international shipping costs have increased because of demand. Rapidly industrializing economies, such as China’s, will continue to import and export in bulk. No one knows how long shipping costs will stay this high but most analysts think the market will remain tight for the next two to three years, according to The Telegraph Co. UK.