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Global shipping chaos caused by surge in online shopping

For the global shipping industry, chaos began with the tap of a million "buy now" buttons, with Americans trapped at home by the pandemic resorting to buying online at a relentless pace. 

At the start of the pandemic, idled ships could be seen anchored off the Singapore coast. But in the remaining months of 2020, the surge caused container vessels to steam across the Pacific, carting goods from China so busily that they became snarled in traffic in California's San Pedro Bay. 

Starting in September, container ships began to pile in at Los Angeles and Long Beach ports. At the port, cranes unloaded containers day and night. Already the largest port complex by volume in the U.S., the adjacent ports of Los Angeles and Long Beach were breaking records for the number of containers passing through each month.

While in May 2020, port volumes had plummeted 29.81% from the previous year, by November 2020, they had increased by 22.06%. By March 2021, they had leapt to 113%.

There are plenty of physical challenges with a surge this drastic. Containers, stacked high on ships speeding along their routes, are toppling off at some of the fastest rates in years. According to an estimate by Bloomberg, 3000 containers fell into the sea in 2020, and another 1000 so far in 2021. When the Ever Given lodged itself into the Suez Canal in March, it blocked $9.6 billion of trade for six days and forced cargo vessels to divert around the continent of Africa.

Seafarers are keeping the global shipping industry afloat, and with it, the world economy. Without shipping, many products, from life-saving medical equipment to the retail goods that have been a salve to millions in isolation, could never be manufactured, let alone reach the world's consumers.

The head-spinning year originally started with a lull. In January and February 2020, the new virus ravaging Wuhan, China, triggered severe lockdowns across the country.

"The factory powerhouse of the world didn't have any output, and that dramatically impacted shipping volumes," Manders of Flexport said. "As a result, everyone in this industry panicked."

Shipping companies took vessels offline and braced for a tough year. Trade routes turned into so-called blank sailings when a carrier cancels a scheduled voyage.

Maersk expects the surge in demand to continue, along with the supply chain bottlenecks and container shortages, as well as the profits, to the end of the year, with container demand growing 5%-7% in 2021.

"There's still such a huge demand surge," Heaney said. "Demand volume doesn't seem to be showing any sign of weakness, and there's no let-up yet, no opportunity to get to have a breather and repair the system. But there's still a lot to be fixed."

While shipping companies are doing what they can with the tools at their disposal, Heaney said, it is "not in their power to fix this alone."

Companies will have to "ride it out" together until the demand curve settles, and port and terminals can at least return to pre-pandemic productivity, he said.

"With this pandemic, nobody really can say anything with confidence," Heaney said. "We think it should start to fix itself by the end of this year. But we'll have to wait and see."

In terms of the outlook, guaranteeing delivery dates at this moment isn't something businesses can offer with any certainty given the limitations of the supply chain capabilities worldwide. We are told to expect that these challenges will continue, especially with empty containers not getting back quickly enough due to the reasons outlined above. With this in mind, we strongly urge you to consider ordering in ample time to factor in longer shipping lead times.

Additionally, where possible, you can assist your networks by supplying quarterly forecast breakdowns, which will help to manage these processes for you as quickly as possible.

As always, the TyTek team will keep you advised and appraised of your order with us. If you have any questions, please don't hesitate to contact us.

 

Source: Nikkei Asia