Containers blocked at global ports; costs up 9 times – Shipping researcher

Rates for container shipping have skyrocketed up to nine times regular levels, as global container blockages keep goods stuck in ports.

There are reports of fruit rotting in containers waiting offshore to be unloaded, and companies like Ikea that depend on uninterrupted deliveries are seeing their shelves empty out.

Cyprus ports have been spared such congestion up to now.

But there are more than 30 container ships blocked at Los Angeles ports every day. Of the 20 major global container ports, 75 per cent saw an increase in the levels of rollover cargo in December compared with the previous month, according to industry statistics. Chinese ports are rolling over more than one-third of arriving containers.

Behind the congestion is a massive upsurge in demand, Simon Heaney, senior manager, Container Research at the London-based independent maritime research consultancy Drewry, told the Cyprus Mail in an interview. “And there is no quick fix. We don’t expect any change until well into the second quarter.”

“There’s just been a huge demand upsurge driven by e-commerce that has caught everyone off guard, and the supply chain just isn’t up to handling it. People are ordering goods online like never before,” Heaney explained. “They can’t go out to restaurants or cinema, so they are ordering DIY

“It’s a lean system that people don’t want to over invest in for obvious reasons, and is not really able to cope with a sort of speed-change we’ve seen. So you’ve gone from a drop-off in demand in the first quarter to an acceleration, unlike any we’ve ever seen before.”

There was a demand drop in the first quarter followed by a massive surge that continued through the second and third quarters, Heaney noted.

“Because of the lag in the first quarter, the boxes just weren’t in the right places at the time when demand picked up. And I think maybe there’s a bit of laxness: The industry didn’t react quickly enough, didn’t feel the urgency.  And then when things suddenly picked up again, the ships were idle, anchored outside ports, or weren’t in the right places. And you’ve also got labour issues as the pandemic has held up crew changes and also reduced the amount of available port workers – on top of that, a shortage of truckers.”

The increase in rates is also unprecedented, Heaney said, although it’s not clear that the increases will be passed on to consumers.

“I’ve been covering these markets for more than 20 years, and I’ve never seen anything like this before. Container rates are always volatile, so you often see rates double or halved in a certain period, but never change at these levels.”

The end result may be that consumers will simply stop ordering. “It’s not clear whether consumers will be directly affected, however, because the cost of freight transport is only a fractional component of the retail price.

But what may happen is that consumers will reduce orders. No one wants to order something and have delivery delayed for long periods. This may lead to a self-correction in container rates,” Heaney continues.

The industry is taking some action, Heaney said.

“There’s been a significant ramping up of new container construction, and we’ve seen prices go up for new boxes. There are also a number of carriers that are taking operational measures like omitting certain ports from their rotation. A number of lines are simply bypassing congested ports, regardless of expense.

Some lines are also using some empty loaders, sweeper vessels to come in and just collect empty containers and move them. Obviously, that’s very, very expensive to do, because you’re not getting any revenue for that. But I guess you can justify it if it means that you can get the containers back to where they are they needed in China, and then charge very high rates on the laden ships,” Heaney concludes.