Background
A Large Sydney-based importer, specializes in furniture wholesales from manufacturers in China and Southeast Asia. The company relies heavily on ocean freight, shipping between 2000–3000 TEUs (Twenty-foot Equivalent Units) annually. In 2021–2022, during the peak of global shipping disruptions, they faced unprecedented ocean freight rate fluctuations, which severely impacted its cost structure, pricing, and supply chain stability.The Issue
1. Extreme Freight Cost Escalation
- Pre-pandemic (2019): Average rate China–Australia was USD 1800 per 40’ container.
- Peak pandemic (late 2021): Rates surged to USD 10000 per 40’ container, an increase of nearly 600%
- By mid-2022: Rates dropped again to around USD 3,500, but with unpredictable weekly changes.
2. Unpredictable Surcharges
- Carriers introduced emergency fees (PSS – Peak Season Surcharge, GRI – General Rate Increase, Congestion Surcharges).
- Final landed costs became highly variable and often exceeded forecasts by 20–30%.
Resolutions
- Secured Long-Term Freight Contracts: After the furniture importer reached out to LHP for assistance, LHP immediately stepped in to assess the situation. LHP provided option for the import to lock in 3 months, 6 months and 12 months contract rate which largely smoothed out the impact on rate fluctuations. Hence the importer is about the make mid to long term budget based on the contracted rate provided by LHP.
