The rise of the delta variant in Asia combined with surging demand around the world have sent shipping costs higher, which will show up in higher costs of imported goods as supply chain problems persist.
The Baltic Dry Index, a metric of shipping costs, has reached an 11-year high as the resurgence of the coronavirus has impeded the movement of goods from Asia.
The Baltic Dry Index captures shipping costs using three sub-indices for ships of different sizes: Capesize (40% of the index), Panamax (30% of the index) and Supramax (30% of the index). It is used as a proxy by investors for shipping out of China.
The delta variant is sweeping across the manufacturing platforms and ports throughout China and much of Southeast Asia. For example, the Ningbo-Zhoushan port, south of Shanghai on the East China Sea, is the busiest in the world with respect to cargo tonnage. It had been shut down since Aug. 11, and has just resumed berthing operations. It will likely be a number of days before the port will return to full operation.
While these delays and costs will ease in the coming months, it will take some time to unwind the backlogs in ordered goods and rising delivery times, both of which are indicative the roughly 257% increase in shipping costs from Shanghai to Los Angeles over the past year.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.