The COVID-19 Pandemic Continues to Disrupt the Flow of Shipping Containers

The COVID-19 Pandemic Continues to Disrupt the Flow of Shipping Containers

Sep 27th 2021

Shipping Container Shortage

Shipping containers flow backward and forward between Asia and America, filling up the cargo ports. The cargo ports send the shipping containers inland via road and rail networks. Almost everything you purchase spends part of its journey to you in a shipping container. A reduction in the availability of shipping containers results in higher prices and scarcities. Global trade organizes the flow of shipping containers in a cycle of use and reuse, but recent disruptions mean there is a shortage of shipping containers.

Why Is There a Shortage of Shipping Containers?

There are currently enough shipping containers in the world to handle global trade, but unfortunately, they are all in the wrong places. The originating event for disruption to international business is the Covid-19 pandemic.

As a result of the pandemic and national lockdown restrictions:

• Containers arriving in ports didn't make the return journey back to China. As the economy recovers, there is a shipping container shortage in the countries that need to export goods.
• Reduced staffing and restrictions in ports result in a bottleneck of processing shipping containers for inland and seaborne traffic.
• Reduced manufacturing means companies didn't claim their cargo.
• Fewer ships available – fewer sailings, opportunity to refurbish, and Covid-19 outbreaks on board.
• Changes in trade – the pandemic has changed what people want to buy, causing fluctuations and uncertainty in global business.

In short, the pandemic disrupted the flow of shipping containers resulting in all the shipping containers piling up in the wrong places.

Where are all the Shipping Containers?

The shipping containers are piling up in inland depots and cargo ports. Pandemic restrictions mean that shipping containers that arrive in North America didn't go back to China. China wants to export goods but hasn't got the shipping containers available to meet its needs. Plus, the production of new containers (80% container production is in China) slowed during the pandemic. Currently, America is sending back 40 in every 100 shipping containers that arrive in port. The imbalance means that containers continue to stockpile. National and local lockdowns disrupted the flow of trade, and the result is that although there are enough shipping containers, there is a shortage of availability where they are needed. Add in higher shipping costs where it is more lucrative for shipping companies to carry containers from Asia to America in preference to the return journey, and you have a cumulative impact.

What Caused the Shipping Container Shortage?

The original cause of the shipping container shortage is the global pandemic creating a domino effect with each step triggering the next. The primary causes of the current shipping container shortage are:

• The uneven flow of shipping containers out from Asia with fewer going back for refilling.
• Decreased production of new containers – number of scrapped shipping containers exceeds new production.
• Staffing shortages in cargo ports, trucking companies, customs offices, and manufacturers result in bottlenecks.
• Fewer Cargo ships sailing during the pandemic.
• Rising prices distorting the pattern of shipping container transport.
• Changing consumer demand for goods increasing the quantity for shipment.

Although the cause is the pandemic, all the other changes combine to cause bottlenecks and accumulations of shipping containers in the wrong places resulting in a shipping container shortage.

What is the Impact of the Shipping Container Shortage?

Most goods transport in shipping containers. A shortage of shipping containers results in higher prices and scarcity of goods that are otherwise widely available. China is the manufacturer for the world, and without shipping containers to carry those goods to the rest of the world, you see shortages. In the run-up to the winter holiday season, most retailers stock up on extra toys and gifts to meet the peak demand. This year there is likely to be a shortage of toys and other gifts because of the shipping container shortage. More seriously is the impact on the supply of food and medical supplies.

The impact of the shipping container shortage is:

• Food wastage and spoiling, higher food prices.
• Delays in retailers receiving stock and manufacturers obtaining raw materials.
• Higher costs of transport leading to inflation.
• General disruption of supply chains.

Some businesses are finding it more effective to destroy returned stock or excess product than paying the cost of returning goods to manufacturers in other countries.

What Can We Expect Through the Remainder of 2021?

The problem of shipping container shortages built up over months and restoring the natural flow of trade will take a long time to rebalance because of the pressures of market economics.

Innovative measures to address the issue include:

• More efficient offloading and reloading of containers to return as many as possible back to China.
• Using excess refrigerated containers as standard dry goods containers where necessary.
• Prolonging the useable life of a container by not scrapping at the standard retirement age.
• Repairing old shipping containers and bringing them back into use.
• Advanced booking and rescheduling of containers.

When Will the Shipping Container Shortages End?

Three Chinese companies produce 80% of the world's supply of new shipping containers. Although these have increased production rates, they only make enough containers to meet the demand of two or three weeks. There is no pressure on the container manufacturers to produce more because the current high prices are profitable. More shipping containers remain in US cargo ports than return to China, and the tight turnaround for the ships unloading and reloading means it will take time for the log jam to clear.

California ports in Los Angeles and Long Beach account for about one-third of the US imports. These ports operate as a primary source of imports from China and have experienced heavy congestion throughout the pandemic, and ships’ average wait times have increased to 8.5 days.

Some analysts think the current shipping container shortages will persist until the first quarter of 2022 as global trade gradually resumes.

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