More than a year after the pandemic, the network of ports, container ships and road transport companies that move goods around the world is in crisis and the cost of shipments is skyrocketing. Added to this is the disruption of global supply chains, exacerbating shortages of consumer products and making it more costly for companies to ship goods where they are needed.
Against this backdrop, unresolved issues and the emergence of new issues mean that shoppers are likely to face higher prices and fewer options this holiday season.
“The pressures on global supply chains have not abated and we do not expect them to do so anytime soon,” said Bob Biesterfeld, CEO of CH Robinson, one of the world’s largest logistics firms.
CLOSING OF THE PORTS OF CHINA
In China, a terminal in the Ningbo-Zhoushan port south of Shanghai has been closed since Aug. 11 after a dock worker tested positive for COVID-19. Major international shipping lines, including Maersk, Hapag-Lloyd and CMA CGM, have adjusted schedules to avoid the port and warned customers that there may be delays.
The partial closure of the world’s third-busiest container port is disrupting the operations of other ports in China, putting further pressure on supply chains already suffering from recent problems at Yantian port, ongoing container shortages, closure of factories related to the coronavirus in Vietnam and the lingering effects of the blockade of the Suez Canal in March.
According to the shipping companies, the transport crises are expected to continue, which will increase the cost of moving cargo on a large scale and could also increase the pressure of the increase on consumer prices.
“We currently expect the market situation to ease only in the first quarter of 2022 at the earliest,” Hapag-Lloyd CEO Rolf Habben Jansen said in a recent statement.
CRISIS: EFFECTS ON THE MARKET
According to data from Drewry Shipping, the cost of shipping goods from China to North America and Europe has continued to rise in recent months, following an increase earlier in the year. Similarly, the company’s global container index shows that the composite cost of shipping a 12-meter container on eight main East-West routes reached US $ 9,613 in the week ending August 19, 360% more than a year ago. anus.
Container shipping prices on routes from Shanghai to Los Angeles and New York have also skyrocketed. But the biggest price jump came on the route from Shanghai to Rotterdam in the Netherlands, with the cost of a 12-meter container skyrocketing 659% to $ 13,698.
“The historically high current freight rates are due to the fact that there is unmet demand,” said Soren Skou, chief executive of container shipping giant Maersk, on an earnings conference call this month. “There just isn’t enough capacity,” he added.
After COVID-19 infections were detected among dockworkers, the closure of the Ningbo terminal will add to the bottlenecks stemming from the June closure of Yantian, a port about 80 kilometers north of Hong Kong.
According to S&P Global Market Intelligence Panjiva, returning to normal Yantian port services took almost a month, spelling big problems for retailers and consumer goods companies trying to restock inventories in the face of the crucial Christmas shopping season in New York. end of the year.
“The Ningbo closure is now particularly delicate as it may delay exports for the peak season for deliveries to the United States and Europe, which generally arrive from September to November,” S&P Global Panjiva said in an investigation note on August 12.
Drewry Shipping said congestion at nearby ports in Shanghai and Hong Kong is “increasing” and spreading in other parts of Asia, as well as Europe and North America, “particularly on the west coast” of the United States.
On the other hand, according to a report by the Marine Exchange of Southern California, around 36 container ships are anchored off the adjacent ports of Los Angeles and Long Beach, this represents the highest number since February when 40 container ships were waiting to enter. Typically, there would be only one or zero container ships at anchor, according to the Marine Exchange.
Congestion in California is starting to be extended to “virtually every port in the United States,” according to CH Robinson’s Biesterfeld. “The chances that your vessel will arrive on time are around 40%, up from 80% at this time last year,” he told CNN Business.
This crisis in the ports will have a ripple effect on clogged warehouses and road and rail capacity. Thanks to demand led by US consumers, logistics networks have been operating at full capacity for months. Truck driver shortages in the United States and the United Kingdom have only exacerbated supply disruptions.
US imports in March and May exceeded levels seen in October 2020, generally the peak of the shipping season, said Eric Oak, supply chain research analyst at S&P Global Panjiva. “This means that logistics facilities have been running out for most of the summer,” he added.
Air terminals are also under pressure, receiving increasing amounts of cargo as companies turn to alternative methods to transport their goods. At some of the largest airports in the United States, such as Chicago, there are delays of up to two weeks to claim cargo, according to Biesterfeld.
RETAILERS PREPARE FOR IMPACT
Supply chains were debated in nearly two-thirds of the 7,000 company earnings calls globally in July, up from 59% the same month last year, according to an analysis by S&P Global Panjiva.
Retailers are taking steps to meet demand, such as changing where products are made and moving them by plane instead of ship.
“In terms of the supply chain… we could talk about this all day. There are challenges around the world,” Chief Executive Officer Edward Rosenfeld said on earnings call last month. “There is congestion in the ports, both in the United States and in China. There are covid outbreaks in factories. There are problems getting containers. We could go on and on”.
Nearly 40% of the volume of goods imported into the United States by sea during the 12 months through July came from the Southeast Asian country, according to data from S&P Global Panjiva.