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Analysis: – Shipping Container Crisis – Open Ports 24/7, Free-up Stranded Boxes, Redirect Cargo To Rail, Road And Air

Analysis: – Shipping container crisis – open ports 24/7, free-up stranded boxes, redirect cargo to rail, road and air

Source: CMA CGM
Copenhagen, Denmark (PortSEurope) July 26, 2021 – The global container shortage has been a problem waiting to happen and the COVID pandemic has only exacerbated it. The red-hot container market with sky-high rates and huge freight demand will continue for months to come and experts now predict that the major bottlenecks in global supply chains will not be eliminated at least until mid-2022. Even if
demand for goods normalises by the end of summer, which is unlikely, in the autumn the pre-Christmas rush for goods starts in both the United States and Europe. Then in early 2022 comes the Chinese New Year. The only 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. The empty containers Shipping container costs continue to rise and incentives to “dead-head” empty containers to Asia (China) for a quicker turnaround is the main reason. Shipping delays are also due to the decisions by maritime shipping companies to prioritise the movement of empty shipping containers back to Asia, unable to fill them with goods because China’s outsourcing-based export is much higher than its import equivalent. Governments around the globe can do very little to force the shipping companies not to send empty containers to Asia. But they can enact legislation to force the shipping carriers to carry export cargo if it can be carried safely and loaded on a timely basis. 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 2022 as the global demand for goods continues to outpace available capacity. The ports Even when the demand starts to ease, the container rates are unlikely to return to their pre-pandemic levels. The containers’ jams overwhelmed the capacity of the ports to process them. The ports’ backlogs sucked up all of the available capacity in ships and containers. What makes matters worse is that there is no spare container ships capacity. Every year, container ships move around 226 million containers. The total available containers in the world are estimated to be 25-30 million TEUs. Of those, however, only 6-7 million are actually being used for transport of goods. The rest are sitting unused. Three months after the last 61 ships blocked by the six days grounding of the huge Ever Given container ship passed through the Suez Canal, optimistic forecasts that container shipping will return to normal within a few months are replaced with predictions that sky-high rates and huge delays will plague the business well into next year. Global logistics powerhouse DSV Panalpina CEO Jens Bjørn Andersen was quoted as saying that supply chain congestion will most likely continue through the rest of 2021. The service level is worse than ever and rates are at an all-time high. An unbelievably bad combination. 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. 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. To deal with the containers’ shortage German Hapag-Lloyd ordered 150,000 new containers for $550 million, the biggest order in the 51-year history of the company. Most of these containers have already been delivered. The company also ordered 8,000 special containers for oversized and dangerous goods. Producing more new containers is not going to solve the problem because the ports are congested and practically all container ships are in use at the moment. This is why shippers switched to railway and air cargo deliveries – two much more expensive options. 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 120 days from up to 60 days previously because of COVID-19-related handling capacity cuts in Europe and the U.S. Industry behaviour confirms that the strong demand for containers is going to last much longer. The CMA CGM Group, a world leader in shipping and logistics, signed in April with CSSC (China State Shipbuilding Corporation) Group an order for: 6 LNG-powered containerships with a capacity of 13,000 TEUs (twenty-foot equivalent unit); 6 LNG-powered containerships with a capacity of 15,000 TEUs; 10 VLSFO-powered containerships with a capacity of 5,500 TEUs. These vessels are expected to join the Group’s fleet between 2023 and 2024. Container shipping infected by COVID-19 United Nations Conference on Trade and Development (UNCTAD) said in a report in April: At the start of the coronavirus disease of 2019 (COVID-19) pandemic, expectations were that seaborne trade, including containerized trade, would experience a strong downturn. However, changes in consumption and shopping patterns triggered by the pandemic, including a surge in electronic commerce, as well as lockdown measures, have in fact led to increased import demand for manufactured consumer goods, a large part of which is moved in shipping containers. In Q3, 2020, easing of lockdown measures and varying speeds of recovery worldwide, as well as stimulus packages supporting consumer demand, inventory-building and front-loading in anticipation of new waves of the pandemic, contributed to leading to a further increase in containerized trade flows. At the outset, the disruptions resulting from the pandemic, trade imbalances and changing trade patterns led to shifts in the geography of container trade. Empty boxes were left in places where they were not needed, and repositioning had not been planned for. Moreover, as carriers introduced blank sailings, that is, skipped port calls, a mismatch between supply and demand for empty containers was exacerbated, as empty containers were left behind and failed to be repositioned. 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. The recent shortage in containers and maritime equipment took stakeholders by surprise. Monitoring of port calls and liner schedules, along with better tracing and port call optimization, are going to help ease the problem. Policymakers need to promote transparency and encourage collaboration along the maritime supply chain, while also ensuring that potential market power abuse is kept in check or prevented. Events (new worldwide wave of the Delta variant of the coronavirus; natural disasters in China and Germany; cyber-attack against South African ports) have conspired to drive global supply chains towards breaking point, threatening the fragile flow of raw materials, parts and consumer goods. Ships transport around 90% of the world’s trade! Heavy competition for available containers led to skyrocketing shipping rates. Compared to Q1, 2020, freight rates for example from China to the United States have gone up by almost 300%. The current limited air freight capacity due to record low number of flights (due to the COVID-19 pandemic) reduces the opportunities to use airplanes for transportation of cargo. Copyright (C) PortSEurope. All Rights Reserved. 2021

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