The world’s ports are congested and shipping containers are hard to come by. Here’s how the current environment is impacting everyone from the shipper to the carrier to the end consumer.
The complete blockage of the Suez Canal shipping route by the mega-ship Ever Given made global headlines in March and put a brighter spotlight on some of the world’s most pressing supply chain issues. But even with the Ever Given freed and ships once again traversing the Suez Canal, ocean shippers continue to grapple with two issues that don’t necessarily make the nightly headline news: massive port congestion and a persistent container shortage.
How Did We Get Here?
Port congestion occurs when ships arrive at the port but cannot load or unload because of the already full port capacity. Ships can either queue up and wait for their turn to get a spot at the port or call-in at the nearby port, Hellenic Shipping News reports. The culprits vary from tight capacity management to increased blank sailings by carriers to the pandemic-led lockdowns (which, in turn, disrupted global trade).
“Across the supply chain, container shipping alliances were the fastest to respond – curtailing services on certain routes or cancelling (blanking) port calls,” the publication explains. “This has disturbed the containers demand and availability equilibrium at ports.” And because ports generally run on fixed capacity that can’t be readily changed/modified to meet the short-term requirements, the problem compounded upon itself as the world’s trade lanes got back up to speed.
“The cargo-space crunch is the latest symptom of a global trade system that was unbalanced even before the pandemic, but is now so lopsided that entire sectors are at a virtual standstill,” The Seattle Times reports. “Since the start of the pandemic last spring, Americans have spent far less on services, such as dining out, and far more with Amazon and other online retailers. That in turn has sparked a surge in imports from Asia.”
The container shortage hasn’t helped the situation any. A trade boom in the second half of 2020 caught the container producers, many of which are based in China, by surprise as the pandemic threw the existing supply of about 25 million boxes off their normal routes, Bloomberg reports. “The manufacturers have been ramping up output ever since, but they’re unable to alleviate shortages that have underpinned soaring freight rates for six months.”
In most cases, Hellenic Shipping News says it’s the shippers themselves that bear the brunt of the costs of port congestion. This, in turn, can directly impact consumer pricing. “…container shipping alliances dominate in terms of market share and ports play a vital role in the marine supply chain,” the publication explains.
“Shippers, who generally rely on sea for international trade (because of the cheapest cost when compared with other modes of transport), generally bear the burden of inefficiencies within the supply chain,” the publication notes. “When they are aware of the inefficiency, they are better prepared, but for inefficiencies caused by disruption (such as COVID-19), shippers have to bear the indirect cost as well, such as loss of business due to late delivery and increased stock holding led by longer/less reliable service leads.”
The impacts of the container shortage and port congestion are trickling down to the retail level, where companies like Costco are speaking out about their challenges in this area. In March, the USA Today reported that the company was having trouble stocking imported cheeses because of a shortage of shipping containers around the globe and bottlenecks at key West Coast ports, such as Los Angeles, Long Beach, Oakland, and Seattle.
Costco CFO Richard Galanti also said that the retailer was seeing decreased supplies for several household goods, including cheese, seafood, olive oil, furniture, sports equipment, and gardening supplies, and blamed port delays and container shortages as the continued issues and caused timing delays on certain categories.
On the container front, and even with rising output of new containers, Bloomberg says the situation won’t get better until June, when vaccine rollouts will ease the pandemic and boxes start coming back to China.
“As we progressively move out of the COVID economy towards the end of the year we’re going to see a normalization of trade in containers,” Textainer Group Holdings’ Olivier Ghesquiere told Bloomberg. “But we are not going to see a situation where there’s an excess of containers in the market,” he said, noting that production capacity is virtually sold out for the first half of 2021.
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