The logistics landscape from Asia to Europe has been significantly impacted by rising freight costs from Asia to Europe during the last months. This surge in costs is attributed to a combination of heightened demand, ongoing congestion at major ports, and strategic rate increases by carriers. To stay ahead of these market conditions, many businesses are proactively buying and booking shipments earlier. This article delves into the key drivers of this situation, the implications for businesses in the pet food industry in Europe, and strategies to navigate these challenging times.

Key Drivers of Rising Freight Costs

Increased Demand

One of the primary factors driving up freight costs is the increased demand for goods. As Western economies recover and consumer spending rises, the volume of goods being shipped has surged. For instance, European imports are expected to peak in the coming months, leading to heightened congestion and increased rates. Some of the buyers in Europe wanted to adjust for the new global logistics situation. They put their orders earlier, e.g. to be ahead of competition for the upcoming seasons business and to address this challenging situation.  This increased demand has put more pressure on the supply chain, contributing to higher freight costs .

Congestion and Capacity Issues

Ongoing congestion at key ports is another critical factor. Ports in the Mediterranean, Singapore, and Colombo are experiencing significant delays, exacerbating the situation. The diversion of vessels due to geopolitical issues, such as the Red Sea crisis, has required approximately 15-20% more vessels to maintain service levels. This increased congestion has led to a shortage of container space in some destinations which is further driving up costs.

General Rate Increases (GRIs)

Carriers, being aware of the situation, have implemented multiple General Rate Increases (GRIs) since May, contributing to the rising costs. These rate increases are expected to continue as carriers struggle to manage capacity and meet the high demand. The combination of GRIs and peak season surcharges has resulted in significant cost hikes for shipping goods from Asia to Europe.

Implications for the Pet Food Industry

The rising freight costs have far-reaching implications for the pet food industry, which relies heavily on raw materials sourced from Asia. Key ingredients such as

  • Kappa & Iota Carrageenan semi-refined & refined,
  • Cassia Gum Food Grade,
  • Guar Gum,
  • Xanthan,
  • STPP (Sodium Tripolyphosphate),
  • and amino acids like
    • Glycine
    • L-Cysteine
    • Taurine
    • D-Xylose

are essential for producing high-quality pet food. The increased costs and potential delays in receiving these materials can disrupt production schedules and impact product availability.

Strategic Partnerships

Establishing strategic partnerships such as those available through the MBB network, can offer businesses more flexibility. Collaborating with our network ensures e.g. access to safety stocks in Europe which are held by our partners to support in such situations and for any short-term demands. This allows companies to maintain a steady supply of essential raw materials despite the challenges in ocean freight. These partnerships can help businesses navigate the current logistics challenges more effectively and be better prepared for similar situations in the future.

Get Ready for the Upcoming Months and Beyond: How to Prepare for 2025

The current surge in freight costs ex-Asia presents significant challenges for the pet food industry. The combination of increased demand, port congestion, and strategic rate increases has created a complex logistics environment. The end is not visible yet and the siutation is expected to continue or even worsen until end 2024 or even into 2025. However, by diversifying supply chains, planning early, and forming strategic partnerships, your business can better manage these challenges and maintain their operations smoothly.

Stay informed about the latest developments and proactively check current demands to plan for the end of the year and New Year demands for 1st Half Year 2025, at least for Q1. Act early to address the new market conditions and keep your supply chain up and running.

We are prepared to “Keep your head free” – Contact us today via LinkedIn for more information or book a meeting directly.