As the coronavirus pandemic swept across the world and plunged many countries into lockdown, shopping habits changed dramatically. This has caused a booming demand which, in turn, has resulted in shipping chaos around the world as retail giants attempt to keep up with increased demand.
Not only are retailers wanting more cargo to be shipped, cargo ports are also suffering issues with supplying enough shipping containers. COVID-19 has only added to these issues. Just three weeks ago, after an outbreak of coronavirus in Guangdong province in Southern China, local ports experienced acute congestion due to lower staffing numbers.
Yantian Port in Shenzhen was also shut down from late May to the end of June, again, as a result of coronavirus cases.
The chaos which these events have caused has resulted in customers booking cargo space well in advance. The managing director for North America of shipping giant A.P. Moller-Maersk spoke on the issue.
“We don’t see demand going down at all. Everybody is concerned about the peak season,” he said.
As supply of cargo space struggles to meet its demand, the limited places which are available have shot up in value over the last year. To ship a container from China to California costs 344% more now than it did at the start of 2020, with prices going up 43% in just the last 6 months.
Those who rely on this method of transport are subsequently really feeling the pinch. Eram Siddiqui, owner of a New-York based fashion company, said that “Pre-pandemic, we bought in our containers for $3,500 to $4,500 and the waiting time to sail was 10 days.” In comparison, Siddiqui is now paying $17,000 per container and having to wait until September for her shipment to leave port in China.
Adding to these costs is an increase in the number of containers that retailers are requiring due to an increase in online shopping over the pandemic. Ms Siddiqui said that shipping costs now account for 30-35% of the company’s revenue, compared to 15-20% before the pandemic.
These costs are likely to cause small businesses to go into administration.
In spite of this, China’s deputy minister of transport, Zhao Chongjiu, has defended his ports.
“Everyone knows that during an epidemic, workers in ports must be placed under lockdown, and various countries have taken corresponding measures, so the efficiency of loading and unloading would be reduced,” he said.
As the Yantian Port reopened this week shipping charges have continued to rise steeply.
It’s not only Asia which is seeing ports struggle, the chief operations officer at The Northwest Seaport Alliance has said that their U.S. ports are struggling to cope.
“We are seeing a historic surge of cargo volume coming into our ports. The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough,” he said.
As a result, ships have been forced by the coastguard to anchor further out at sea, waiting days for the chance to dock at ports and offload their goods.
What Impact Could This Have?
An accumulation of issues which the industry is experiencing currently could lead to shortages in the run-up to Christmas, industry experts have warned.
James Baker, editor of the shipping industry publication Lloyd’s List, has warned that, as a result, retailers are booking their cargo slots far earlier than normal.
“One of the issues at the moment, which is aiding the congestion, is the fact that everyone knows that the lead times are really slow, so retailers are booking their Christmas goods already,” he said.
“If you want to get something for your family for Christmas, start shopping now,” Mr Baker advised.
Rising shipping costs and delays are also starving the economy of the goods it requires to grow, subsequently contributing to shortages and inflation. Issues getting exports out of the country are also having an impact. As shipping companies are so desperate to get containers back to China quickly, they have been leaving port without waiting to fill up their containers with American-made products, subsequently impacting the export market.
Has America Responded?
Aware of the issue at hand, President Biden has made plans to sign an executive order to increase competition and combat high prices in the shipping industry.
Transportation Secretary Pete Buttigieg is also hoping to examine how to address shipping delays in both Los Angeles and Long Beach, which manage 40% of overseas imports to the U.S. Shipping prices will also be looked into as part of the administration’s Supply Chain Disruptions Task Force.