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Analysis – Shipping Container Crisis Seen Lasting By End-2023 Or Even Longer

Analysis – Shipping container crisis seen lasting by end-2023 or even longer

Copenhagen, Denmark (PortSEurope) December 12, 2021 – The global container shortage will last until the end of 2023 and could extend even into 2024 with a red-hot container market, sky-high rates and huge freight demand. Major bottlenecks in global supply chains will not be eliminated in 2022. The lack of containers and mounting delays in cargo handling in all major ports have been a problem
waiting to happen and the Covid-19 coronavirus crisis has only exacerbated it. Even if demand for goods normalises by the end of summer next year, which is unlikely, in the autumn the pre-Christmas rush for goods starts in both the United States and Europe. Then in early 2023 comes the Chinese New Year. The only major buffer left under-utilised in the container transport system are the ports and their ability to speed-up the processing of containers. Ports around the world should run 24 hours a day seven days a week to ease congestion. This idea might be opposed by the trade unions, but it is the only practical and relatively quick fix for the problem. Production facilities that are using containers as temporary storage solutions should also try to release them faster. The “just in time” manufacturing model will suffer. Companies should redirect cargo to rail, road and air. Shipping container costs continue to rise and have increased around eight times compared to prepandemic levels. The incentives to “dead-head” empty containers to Asia (China) for a quicker turnaround is the main reason. Shipping container rates have spiked by as much as five times since the onset of the pandemic and are likely to remain elevated beyond the Lunar New Year in East Asia, 2022, as the global demand for goods continues to outpace available capacity. Even when the demand starts to ease, the container rates are unlikely to ever return to their pre-pandemic levels. The containers’ jams overwhelmed the capacity of the ports to process them. The ports’ backlogs sucked up all the available capacity in ships and containers. What makes matters worse is that there is no spare container ships capacity. This is why new container ships orders have risen significantly in 2021, but the new vessels will not be delivered before 2024. Every year, container ships move around 230 million containers globally. The total available containers in the world are estimated to be up to 30 million TEUs. Of those, however, only 6-7 million are actually being used for transport of goods. The rest are sitting unused. Container manufacturing is concentrated in China (some 97% of all containers are produced there), so there isn’t anything that authorities outside of China can do. Container makers have increased production since last quarter of 2020 and their capacity is fully booked until the end of the year. This also led to an increase of the prices of new containers. Ports worldwide are still facing a tsunami of delays on ships containers. They have to be unloaded, processed, stored and loaded on trucks or trains. But most ports are currently operating at the limit of their containers’ handling capacity, a situation aggravated by the coronavirus pandemic and its related restrictions. A key risk to ports in the months ahead is “vessel bunching,” when ships go off schedule and arrive too close together, filling up anchorages. As a result, container ships skip ports and cancel sailings. The Mediterranean ports are already operating at the top of their capacity and try to cope with delayed containers. But the real issue is the huge delay in the return of empty containers back to Asia, mostly to China. The slow return of containers to Asia, particularly to China, has led to container shortage, leading to accumulation of goods in China’s ports and a significant increase in containers’ rates. The main issue is how quickly the empty containers could be redirected to where they are most needed. Ports around the world are still operating in coronavirus quarantine mood and this contributes to containers’ shortages due to a slow pace of loading, unloading and transporting the containers there. Average container turnaround times have ballooned to over 130 days from up to 60 days previously because of COVID-19-related handling capacity cuts in Europe and the U.S. as well as unexpected surge in demands for goods, parts, equipment The container crisis is also a reflection of a slowdown in and delays across the maritime supply chain due to strains caused by the pandemic, such as port labour shortages, port congestion (also due to blank sailings) and capacity constraints in truck and other inland transport systems due, for example, to delays in undergoing necessary testing or delays by factories in returning containers. These factors meant that container dwell times increased, and empty containers could not return to the system in which they were most needed. More PortSEurope coverage about containers’ shortages. Copyright (C) PortSEurope. All Rights Reserved. 2021

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