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South Korean exporters urged to brace for rising ocean freight rates

Ships carrying containers dock at a port in South Korea’s southeastern port city of Busan on March 2. (Yonhap)
Ships carrying containers dock at a port in South Korea’s southeastern port city of Busan on March 2. (Yonhap)
South Korean firms that are heavily reliant on exports should come up with diverse ways to cut down on their logistics costs amid a prolonged surge in ocean freight charges, a report suggested Friday.

Ocean freight rates are rising and could continue for a long time against the backdrop of unstable supply and demand for empty containers and a rise in demand due to revenge consumption, the Institute for International Trade warned in its report.

To achieve a competitive price edge, exporters can cut down customs duty and logistics fees by changing the terms and conditions of Incoterms -- a set of predefined commercial terms widely used in international transactions process, said the institute, a research center under the Korea International Trade Association.

Companies should also consider working closely with customs corporations and specialized logistics companies for a similar goal, the report added.

The suggestion comes after the Shanghai Export Containerized Freight Index, a benchmark for shipping rates, hit 2,833 points last Friday, up 241.3 percent from the same week last year when the figure stood at 830.

The Shanghai Shipping Exchange’s freight index began to rise after reaching a low point last May, with US routes seeing the uptrend first before other routes in Europe and South America.

The report noted that “coronavirus cases among dockworkers and truck drivers,” coupled with the “complicated structure of international logistics” led to pileups at ports and a slow return of empty containers.

“The grounding of the Ever Given cargo ship in the Suez Canal last month is feared to have helped cause the freight rates, which were briefly declining at that time, to rise again,” the report said.

“While the ocean shipping industry is increasing new orders for containers to address the growing cargo volume, shipping capacity is unlikely to recover shortly,” said Cho Seong-dae, a chief researcher at KITA.

By Yim Hyun-su (hyunsu@heraldcorp.com)
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