03 Sep A 2021 Look at the Global Container Crisis
After losing billions of dollars for years, the container shipping industry is finally turning a profit. However, there are still plenty of problems it has yet to work out. Most notably, quality and schedule reliability have plummeted in the last year or so. Between shipping delays and rising rates, consumer satisfaction is understandably low.
While this global industry has been on the rise for many years, so much has changed recently. Because there are many factors impacting the industry, it would be impossible to give a brief summary. But if you really want to know, here are some of the biggest challenges container vessels are facing around the world.
The Interconnected Supply Chain
Water is the heart of world trade. In fact, this is the way about 90% of world trade is transported. One key to remember about the global container situation is just how connected all the ports are. If there’s a problem with one port, it can lead to delays all around the world.
In the last decade, there has been some major consolidation with shipping companies as some of the biggest companies merged with or bought out other companies. Smaller container companies responded to these moves with an alliance meant to keep their own costs as low as possible. This has created even deeper connections in the industry and the potential for more catastrophic domino effects.
Consumers got a rare glimpse into just how connected these vessels are in March when the Ever Given got stuck and ended up blocking the Suez Canal. Companies that had ships behind the obstinate vessel could do one of two things: stay in line at the Suez and wait for the Ever Given to move or take a longer route to get to their final destination. No matter what choice companies made, the result was a delay, impacting raw materials needed for manufacturing as well as goods that are built for sale.
Ever since the container ship’s maiden voyage in 1956, these vessels have been getting larger and larger. They are measured based on twenty-foot equivalent units (TEUs) with each TEU being about the size of one shipping container. Today, some of the largest container ships measure nearly 24,000 TEUs!
While larger vessels may sound advantageous to businesses and consumers, the opposite may actually be true. When so many containers are stacked on top of each other, there’s always the possibility that they will fall into the ocean. This is because when a large ship is completely packed with cargo, if it hits some turbulence in the water, there can be accidents. Containers can get lost this way. Because of this, some companies are questioning the efficiency of mega vessels and exploring the idea of utilizing smaller ships that hold only about 12,000 containers.
Tariffs and Trade Policies
You can’t talk about any part of the supply chain without mentioning tariffs. In the last three years especially, container shipping companies have altered their schedules based on specific tariff deadlines. To avoid paying new tariffs, retailers would bring in tremendous volumes of products that weren’t needed yet, but they assumed would be needed in the future. This phenomenon (known as frontloading) resulted in ports being overcrowded with insufficient people to process the excess containers. Then at other times, they would bring in nothing and there would be a lull in freight forwarding activity.
The COVID-19 Pandemic
The COVID-19 pandemic has left no industry untouched—and it’s had a major impact on freight forwarding. Shipping vessels cannot get from point A to B without people. So when workers were falling ill with coronavirus, few workers were available to load and unload cargo. Sometimes entire ships were quarantined, and consumers around the globe experienced massive delays.
To overcome some of these obstacles, ships are likely going to become more automated in the future. Of course, even if ships become more automated, reskilling or upskilling the workforce to preserve jobs is crucial. In addition, some people will still be necessary to point containers in the appropriate direction.
Because of COVID, a lot of manufacturing also had to be shut down. When you mix low supply with the high consumer demand, the result is even more significant delays.
While more people are getting vaccinated, more variants are also popping up. The question remains how much COVID will continue to impact shipping containers in the future. For example, there’s been another COVID outbreak in eastern China which has affected the world’s third busiest port. Things got so bad that they had to close down a crucial part of the port. With the upcoming holiday shopping season, the outbreak could not have come at a worse time.
Summer 2021 Typhoons
This COVID outbreak in China isn’t the only logistics challenge coming out of the world’s most populated country. China has experienced a particularly active typhoon season this summer. This has (you guessed it!) created more delays.
Delays and a lack of supply have driven up shipping rates by a factor of four or sometimes even ten, making a ship’s passage from China to the U.S. more expensive than ever before. These staggering prices won’t just go away overnight. Consumers should expect to see rates remain high through the beginning of 2022.
How Prime Freight Can Mitigate Common Freight Forwarding Concerns
In this time when there’s so much unpredictability in freight forwarding and companies are seeing some of the highest shipping rates on record, you need all the help you can get to protect your company’s bottom line. That’s why you should use Prime Freight! Through the power of the most innovative technology and exceptional industry expertise, we can help you get the best price on your containers every time. By giving you greater control over your supply chain, we also give you greater peace of mind.
When you partner with Prime Freight, you can expect ongoing support, instant price comparisons, and so much more! You can get started by exploring all our features today!