The global shortage of shipping containers that started with the pandemic in the first quarter of 2020 is still ongoing. As a result, there’s a drastic surge in container and shipping costs along with a longer wait for the concerned parties. The container shipping industry doesn’t have enough containers to deal with the shipment demand. This problem has persisted for over a year and it is not till the end of this year that the situation is expected to go back to normal. In November 2020, you have read about the causes of container shortage on our blog. Seven months down the line the problem still persists so we are publishing a follow-up post about the global impact of the continuing container shortage.
The rise of the container shortage
In the beginning of last year, the lockdown first hit China, followed by Europe and the US, and later almost everywhere in the world. Most importantly, the ports were operating with a limited workforce which in turn slowed down the shipment handling process. Factories all over were temporarily shut down as a result of which several containers were stopped at the ports. The restricted movement of shipments prompted the shipping lines to reduce the number of ships for balancing the cost. The slow commercial activities together with the reduced number of ships from the months from April to June 2020 resulted in blank sailings which in turn contributed to the container shortage. Moreover, the pandemic distinctly changed the buying behaviour of customers. This has led to several irregularities in international trade. In addition, it has also considerably increased the cost burden of the carriers.
At this point, the world’s largest manufacturers of shipping containers are struggling to meet the increasing demand for metal boxes. This has taken the form of a crisis since these containers move around 80% of the goods around the international economy. The restoration of trading activities since the second half of 2020 has put pressure on Chinese container manufacturers. Even after ramping up the container production, they are unable to deal with the shortages. One of the worst effects of this shortage on the container shipping industry is the rising shipping rates. Additionally, the Suez Canal blockage also triggered a surge in shipping prices.
The container shortage is going to last till the end of this year
According to a spokesperson from container leasing company CAI, “There’s no indication from the shipping companies that they expect to see any easing of the tightness of supply that they’re dealing with”. Chinese container manufacturing giants CIMC, CXIC, and DFIC — produce almost 80% of the world’s containers. They have stepped up their production so there’s going to be an estimated 6% to 8% growth in container capacity in the coming months. However, the containers aren’t not being produced fast enough to address the capacity crunch. According to Mr. Callaghan, a representative of container manufacturing company Triton, in spite of increased production since the end of 2020, the inventory of new boxes is still very low. As a result the shippers now have just a few weeks’ supply in hand.
When the container shipping industry can expect ease in the crunch?
Production isn’t the only factor that will help to ease the container crisis. The port congestion is also a significant cause of the container crunch. Additionally, the situation has further complicated since the accident at the Suez Canal. These kinds of logjams further hold up the containers which exacerbates the crisis. Moreover, the destination ports of the Chinese cargoes are now facing a peculiar circumstance. The ships are rushing to turn around so many vessels are leaving behind empty containers and returning to China. These ships are not inclined to wait for all the empty containers and some are leaving with 5%-8% less containers.
Although these bottlenecks are not going to be resolved quickly, they are not permanent. Therefore, sooner or later we will find a solution to free up the container capacity. Experts in the container shipping industry are of opinion that we can only expect ease in the crisis when the trade normalizes. The boom in commercial activities will not slow down till the pandemic abates. According to Olivier Ghesquiere, the CEO of Textainer Group, a container leasing firm, right now there is no possibility of seeing an excess of containers in the market. This is because the production capacity is already at its fullest. Moreover, this trend will continue for the next few months.
Limited air freight capacity is adding to the container shortage
The container shortage has been heightened by yet another factor viz the limited air cargo capacity. These days several high-value shipments such as iPhones that were normally moved by air freight are now being shipped via containers. Furthermore, the coronavirus and travel restrictions have taken a toll on the air freight capacity. The air cargo companies used to move a substantial quantity of freight in the belly hold of the passenger aircraft. Therefore, cargoes that were previously transferred via flight are now being moved via ocean freight. Added to this is the rising demand for goods. So as mentioned earlier, the crisis will only end when all the restrictions in movement normalize.
Few tips for independent freight forwarders to deal with the container shortage
Before concluding, it is important to mention two important tips that will help the independent freight forwarders to better cope with the shortage.
Firstly, they need to optimize their bookings. A lean booking process will help the forwarders and all other stakeholders in the shipment to lessen their workload. This is why it is always suggested that you book your shipments at least a month before departure. This will you will be able to avoid last minute cancellation of shipment because of unavailability of containers.
Secondly, and more importantly the freight forwarders need to have a robust forecast to help in these volatile circumstances. Therefore, you need to look for dependable forecasts for planning alternative routes and the kinds of containers to be used. Additionally, you need to be more flexible so as to increase your options.