The Shipping Container Shortage Continues to Cause Supply Chain Disruptions
Nov 22nd 2021
Shipping Container Shortage Update
It is no secret that one of the aftereffects of the global pandemic is a massive rise in prices and shortages. Shipping containers are essential to international trade, and the current shipping container issues are at the heart of the recent disruptions in supply chains.
How Long Has It Been Going On?
The shipping container shortage started because of the global pandemic and national lockdowns coming into force at the end of 2019. China came out of pandemic restrictions earlier than the rest of the world and resumed shipping goods to North America and Europe.
Restrictions in North America mean that the containers arriving did not return – the beginning of an imbalance in container locations. The current shipping container shortage is more of a container location issue than a numerical shortage of containers. Simply put, the flow of containers isn't working as well as before the pandemic.
Is the Shortage Situation Getting Better or Worse?
It is difficult to decide if the shipping container shortage is becoming less of an issue because there are multiple factors disrupting world trade:
• Staff shortages – truck drivers, unloaders, warehouse staff.
• Trade imbalances – more goods are coming in than leaving.
• Mergers of the shipping companies are driving up prices.
• Chinese port out of commission through coronavirus outbreak among staff.
Price differences in the value of moving freight from Asia to North America heavily impact inland agriculture. For example, California exports nuts worldwide, but the recent issues have doubled the time to move nuts from California to Europe. The economics of the freight market may mean that it is more profitable for shipping companies to send empty containers back to Asia for a fast turnaround rather than waiting to fill them for export. The main issue is the handling of excess containers piling up in US ports and cargo depots, meaning current trade problems are likely to continue.
Update on the Los Angeles and Long Beach Ports
These two sister ports handle 40% of the North American cargo trade and handle the largest container ships.In recent months, container ships must anchor outside the ports to wait for access for unloading and reloading. Due to congestion of the rail networks and a shortage of trucks and drivers, there are ongoing difficulties in getting the unloaded containers out of the ports. This in turn results in record numbers of boats awaiting to be unloaded, in excess of 80 at a given time.
Some companies have hired charter ships to bring in their goods, but these charter ships are a low priority for the ports compared to regular customers. The charter ships can wait for twice the length of the regular shipping companies for unloading. Space at the ports is limited, and the increased dwell time (amount of time a container spends in port) further delays the ports' capacity to unload arriving ships.What is the Impact on the Upcoming Holidays?
Despite everyone's best efforts, you can expect delays in receiving goods as well as shortages due to transport and supply issues. Consumers can already see price increases because of the additional cost of freight.
To minimize the impact on your holiday celebration, shop early to allow plenty of delivery time and shop local where you can. You can expect the delivery time for goods bought online to increase up to several weeks. Even local gifts will take longer to deliver because of the internal shortage of truck drivers to transport goods around the country.
| Container Shortage | Port Congestion |
|---|---|
 |
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| Although there is no actual shortage of shipping containers globally, returning containers to Asia is unbalanced. Three companies in China make 80% of global shipping containers and these increased production in the past year.
These companies are understandably reluctant to raise output excessively because as trade returns to expected flows, there is potentially an excess number of containers in the world. Some shipping companies are rapidly unloading reloading ships with empty containers in an effort to send more containers back out to sea in a shorter time frame. |
The ports of Los Angeles and Long Beach have taken these steps to reduce congestion in the ports:
• Extended operations to 24/7 to give more appointment slots for trucks coming into the port to pick up containers. • Flat fee for truck appointments – previously charged more for peak times to encourage usage of unpopular time slots. • Dwell fees - $100 per day when a container outstays its welcome in the port to free up valuable space for new containers. • Negotiating to buy additional land for the storage of containers as current storage facilities are too restrictive. • Careful management of ships at anchor to process cargo efficiently for high-priority items and critical supplies. |
When Can We Expect the Number of Containers to Increase?
Peak seasonal demands mean the demand for shipping containers is high and unlikely to reduce until the backlogs at ports decrease and pre-pandemic levels of transit are achievable.
• The number of truck drivers and other staff needs to increase – staff shortages through the pandemic, the older workforce retiring, and the lack of newcomers to the labor market.
• Market needs to drive exports from the US. Currently, shipping companies make a greater profit bringing goods into the US.
How Much Longer Can We Expect This Situation to Persist?
Peak seasonal demands mean the demand for shipping containers is high and unlikely to reduce until the backlogs at ports decrease and pre-pandemic levels of transit are achievable.
• Labor shortages through illness and other factors,
• Explosion of the demand of goods for people in lockdown.
The effect of the pandemic, in a rolling closure of ports and supply chains through lockdown and illness, resulted in backlogs in ports and trade disruption.
The impact of inflated prices is further distorting trade route operations. It will take time for these factors to resolve. Until the measures to get ports moving freely again take effect, you can expect ongoing issues with obtaining access to continue.
What Can We Expect for 2022?
Most analysts agree that container shortages will persist through the early part of 2022. The current season sees a high level of demand for seasonal goods and office equipment. As people go back to working in an office, equipment is needed to facilitate new ways of working.
The increase in transit, additional freight costs, and shortages adversely impact sensitive agricultural exports. The disruption in supply from China may result in US companies switching to manufacturing goods in closer geographical locations such as South America.
In the first half of 2022, you will likely see higher prices for goods and freight with some shortages until regular service resumes. Provided nothing else happens to disrupt the shipping trade in 2022, most experts predict that by the middle of 2022, the ports will be running smoothly, and global trade will continue to flow along the usual shipping routes.
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