Why Is International Shipping So Expensive? 5 Reasons Why

Thursday, June 27, 2024

As more businesses expand their reach, many wonder, “Why is international shipping so expensive?” This is a common question with a complex answer encompassing global events, economic shifts, and logistical hurdles. Yet it remains an excellent way to build your eCommerce business for growth.

Although international shipping offers many advantages, the cost is a significant factor for eCommerce businesses, particularly those shipping to Latin America.

We will uncover the factors contributing to why international shipping will be so expensive in 2024 and offer solutions. We will also provide valuable information and tips on managing and lowering your overall international parcel delivery expenses.

What Impacts International Shipping Costs?

Several factors contribute to international shipping rates. These include rising fuel prices, increased demand for shipping, global supply chain issues, and the type of goods being shipped. Understanding each element is crucial to managing those costs.

1. Global Shipping Container Shortage

The global shipping container shortage significantly impacts the price of shipping. Due to COVID-19, the United States and Europe had an overabundance of shipping containers from China stuck at ports as economies globally stalled.

The availability of containers from China was reduced, sparking increased demand for available containers. Moving forward, this sent prices higher. Orders for new containers were outright canceled because of the pandemic.

This resulted in manufacturers producing significantly less supply while demand increased rapidly, fueling increased costs for each available container.

Prices have increased dramatically. Before the shortage in early 2020, new containers cost $1,800 per CEU (a measure of a container's value).

By late 2020, that number had risen to $2,500. In 2024? They’re going for as high as $3,500, almost double. This ultimately affects businesses because every spot on a container will have a much higher price, thus raising costs.

2. Shipping Delays

Unfortunately, the global shipping container shortage isn’t the only reason international shipping costs have skyrocketed. Shipping delays also play a role.

Suez Canal Accident

Two words: Ever Given. If you recall, back in March 2021, this one ship caused a log jam in the Suez Canal when it became lodged, blocking other shipping vessels from traversing the canal.

For almost a week, the Ever Given brought this extremely important trade route to a complete standstill.

Why is this significant to international shipping prices? Consider the following statistics:

  • 12% of the world's trade flows through the Suez Canal.
  • It’s estimated that $2.2 billion to $3.9 billion was lost in international trade due to delays caused by Ever Given.

Delays at shipping ports are already challenging at best, with ships backed up for days. Add on something like what happened at the Suez Canal, and that's just pouring fuel on the fire.

This is one of the primary drivers for why international shipping is so expensive today.

3. COVID-19 and Lockdowns

The ripple effects of the pandemic are still impacting global trade today, from shipping delays and staffing shortages at ports to political unrest. The pandemic also impacted the availability of shipping containers, affecting shipping prices.

Let’s use China and the impact of COVID-19 on its ports as an example. Many Chinese cities experienced rolling blackouts and strict lockdown measures because of COVID-19 outbreaks, but the Guangdong province, a shipping hub representing 24% of the country's total exports, felt it most.

This had a significant negative impact on its ports in 2021. Ships waited an astounding 16 days for their turn to unload in the Yantian port in Shenzhen - a stark difference from the pre-COVID wait time of just half a day.

4. Increased Fuel Costs

In our globalized world, only some industries have escaped the impact of fuel surcharges, which affect shipping costs. Since 2020, companies like FedEx and UPS have added exorbitant fuel and transportation surcharges.  

These surcharges significantly increase the cost of their multi-modal logistics services, like air and ocean freight (thus making it more financially difficult for eCommerce businesses).

5. Regulatory and Compliance Costs

Shipping internationally is more complex than slapping a label on a box and hoping for the best. Every country has its own set of rules and regulations for what can and cannot be imported. These rules can be super specific, too, regarding the materials used in your products.

Think about it like this: you wouldn't want someone sending dangerous or illegal stuff into your country, right? That's why customs agencies exist! They make sure everything coming in meets their standards.

But here's the thing: dealing with all this paperwork and inspections takes time and money. You've got to fill out customs forms, pay import duties, and sometimes even get special licenses or permits. All this adds up, and those costs get passed on to businesses trying to ship internationally.

Other Contributing Factors to High International Shipping Costs

Several other factors can impact international shipping costs in a more minor yet substantial way. Although these fees can be challenging to see at first, they can significantly increase the cost of shipping.

Factors Impacting International Shipping Costs

Courier Agreements

These consist of many steps, and even though they aren’t generally expensive, they can make the shipping cost considerably higher. This is because each step is a separate fee on top of the other.

Value-Added Courier Services

These services often include surcharges and fees based on the delivery location or residential address. This quickly adds shipping costs to eCommerce merchants, who usually see these reflected within courier agreements.

Overhead Costs

Shipping companies absorb the costs of moving goods through various stages, from handling, transportation, and storage to regulatory compliance and administrative overhead. These costs are then reflected in shipping rates.

Minimum Package Charges

Many courier businesses impose minimum package charges to streamline operations and offset low-volume shipments’ operational expenses. This is the minimum fee to ship any package, so even a tiny package could cost more.

FAQs About Why International Shipping Is so Expensive

What Is The Cheapest Way To Ship Internationally?

Generally, the cheapest international shipping method depends on several factors, such as the destination country, size, and package weight. Desired delivery speed also plays a role. Opting for surface mail or sea freight is generally a good option for larger or heavier shipments.

How Much Should International Shipping Cost?

This varies on what's being shipped and where it's going. Product value, size, and weight play a big role, as do import duties, package insurance, and how quickly it has to get there (delivery speed). The easiest way to find out about your product is to get quotes from different shipping services (SkyPostal if you're shipping to Latin American countries) and compare different international zones.

So, Why Is International Shipping so Expensive?

Knowing why international shipping is so expensive requires looking at the bigger picture. Consider what’s happening at a macro level with trade relations and political policy changes impacting rates. Throw in an unexpected global event that affects things like fuel prices and available container ships - all necessary parts of international trade - and then we have a recipe for volatile price fluctuations.

It is wise to take the necessary steps to reduce your company's international shipping expenses. Explore what other alternatives exist. For example, moving manufacturing locations closer to your customer base can reduce shipping costs. Leveraging the power of automation in your supply chains or even bringing your delivery operations in-house can effectively reduce your long-term international shipping costs in this volatile global market.

For more information or to work with a reliable shipping partner, contact SkyPostal today!