March 8, 2021
Empty containers are piled up at ports in Australia and New Zealand; containers are scarce at India’s port of Kolkata. While far away off the coast of Los Angeles, more than two dozen container ships filled with highly sought imports have been idling for as long as two weeks. While in Kansas City, farmers are struggling to ship soybeans to buyers in Asia. In China, furniture destined for North America piles up on factory floors.Around the planet, the pandemic has disrupted trade to an extraordinary degree, driving up the cost of shipping goods and adding a fresh challenge to the global economic recovery. The virus has thrown off the choreography of moving cargo from one continent to another. At the center of the storm is the shipping container, the workhorse of globalization.
Containers that carried millions of masks to countries in Africa and South America early in the pandemic remain there, empty and uncollected because shipping carriers have concentrated their vessels on their most popular routes — those linking North America and Europe to Asia.
And at ports where ships do call, bearing goods to unloading, they are frequently stuck for days in floating traffic jams. The pandemic and its restrictions have limited the availability of dockworkers and truck drivers, causing delays in handling cargo from Southern California to Singapore. Every container that cannot be unloaded in one place is a container that cannot be loaded somewhere else.
Economies around the globe are absorbing the ripple effects of the disruption on the seas. Higher costs for transporting US grain and soybeans across the Pacific threaten to increase food prices in Asia.
Rice exporters in Thailand, Vietnam, and Cambodia are forgoing some shipments to North America because of the impossibility of securing containers. The chaos on the seas has proved a bonanza for shipping companies like Maersk, which in February cited record-high freight prices in reporting more than $2.7 billion in pretax earnings in the last three months of 2020.
Since they were first deployed in 1956, containers have revolutionized trade by allowing goods to be packed into standard size receptacles and hoisted by cranes onto rail cars and trucks — effectively shrinking the globe.
Today, no one knows how long the upheaval will last, though some experts assume containers will remain scarce through the end of the year, as the factories that make them — nearly all of them in China — scramble to catch up with demand.
Any hitch means delay and extra cost for someone. The pandemic has disrupted every part of the journey.
More than a decade ago, during the global financial crisis, shipping companies saw their businesses savaged.
As a mysterious virus emerged in China early last year — prompting the government to shut factories to contain its spread — the shipping industry braced for a replay. Carriers cut their services, idling many of their vessels.
Viewed broadly, the volume of global trade dipped by only 1% in 2020 compared with the previous year. But that doesn’t reflect how the year unfolded — with a plunge of more than 12% in April and May, followed by an equally dramatic reversal. The system could not adjust, leaving containers in the wrong places, and pushing shipping prices to extraordinary heights.
The dysfunction on America’s West Coast has caused problems thousands of miles away.
Scoular, one of the largest agricultural exporters in the United States load grain and soybeans into containers at terminals like Chicago and Kansas City, and then send them by rail to Pacific ports en route to Asia.
Given the prices fetched by containers in Asia, shipping carriers are increasingly unloading in California and then immediately putting empty boxes back on ships for the return leg to Asia, without waiting to load grain or the other U.S. exports. That has left companies like Scoular scrambling to secure passage.
Delays at the ports frequently bump Scoular’s containers to different vessels, forcing the company to redo its customs paperwork — another delay.
In recent weeks, shipping carriers have aggressively moved empty containers to Asia, increasing availability there, according to data from Container xChange, a consultant in Hamburg, Germany.
Some experts assume that as vaccinations increase and life returns to normal, Americans will again shift their spending — from goods back to experiences — reducing the need for containers.
There could be a whole other subset of consumers out there that haven’t been able to consume and you are potentially looking at some shortages for quite some time.