Shipping delays are causing a scramble for containers

April 10, 2023 Freight ForwardingLogisticsSupply Chain

In 2020 when the covid-19 pandemic gripped the world, national lockdowns were implemented simultaneously by countries which brought the global trade to a near standstill and ultimately slowed down the economic growth. Shipping companies greatly reduced the number of cargo ships that were sent out in response which not only decreased the import and export of goods but also lead to containers being stranded in ports across the globe.

One example of this effect was seen in the American part of the world where containers from Asia were not being sent back due to restrictions pertaining to the pandemic. However as most countries had just begun grappling with the pandemic, China was the first to recover- resuming trade while other countries were still unable to reopen. Containers began to pile up in the United States because of limited workers leading to a 40% imbalance- that is for every 100 containers that arrived to the North America only about 40 were exported leaving behind 60 to accumulate. On an average the trade route from China to USA sustains about 900,000 TEUs every month. That leaves behind a staggering number of containers in backlog during a time when the shipping volumes were at a record high.

What precipitated the container shortage?

Due to the sudden shot down of trade around the world a significant number of containers were left stranded in inland depots while many others stacked up in cargo ports. As the Asian countries began to open trade slowly, other countries were still in strict lockdown mode making it impossible to send containers back to Asia where there was a real need. Adding to the already escalating problem, the consumer purchasing shifted from services to goods because of country wide lockdowns. This resulted in an increased demand for containers and a subsequent skyrocketing of prices.

Delays across the maritime supply chains were also a major contributor to the container crisis. Post congestion, labour shortages, blank sailings by carriers and delays at the level of inland transport systems, delays at the manufacturing units all compounded to container dwell times at ports and inland depots. Added to this were the fully loaded container ships anchored off from ports waiting for the berths to clear.

The other part of this multifaceted situation is that during the time of the Chinese New Year which is in the month of February, it is normal to see disruptions in container availability. The already strained supply of containers was impacted more than ever because of the celebrations. The final knockout blow came in March when the freighter Ever Given disrupted the Suez Canal for almost a week bringing about 15% of the global container traffic to a standstill causing massive delays everywhere.

Considerations to avoid delays

Since there was no contingency plans to preemptively deal with the situation that spiraled out of control, shippers, ports and carriers were all taken by surprise. At the current level it will take months before the backlogs are cleared and smoother operations resume. The need for the future are resilient supply chains that are digitized enough to quickly absorb disruptions. The recent container shortage highlighted the need for tracking and tracing and forecasting through greater transparency. Policymakers also need to promote higher collaboration and information flow between the various maritime supply chains and refine port calls and linear schedules are monitored.

While the pandemic is mostly to blame for the massive disruption, freight forwarders and carriers could have softened the impact if they had not already delayed the repositioning of the containers well before the crisis struck. Having the necessary oversight to mitigate a crisis is possible through modernization of supply chains especially in developing countries where the lack of technical resources is a major hindrance to international container shipping. As numerous measures are currently underway to break out of the deficit deadlock such as carriers improving their efficiency in their unloading systems or to reduce free time and detention periods, it remains to be seen how long it would take before trade is established back to normal levels.

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