Is the Shipping Industry Running On Empty?

By November 17, 2020Blog

It’s not just PPE that’s in short supply. The shipping containers themselves are a scarce commodity across the Asian continent and have been causing headaches for people and businesses trying to manage the global supply chain. It’s an issue with an elusive answer as consumers spend less on service and more on imported goods amid the pandemic.

It’s no surprise to anyone that ocean freight rates are surging costs for those lucky enough to secure a box.

Try To Contain Yourself

Equipment shortages across Asia are currently a significant challenge for both carriers and forwarders, with 40′ high-cube containers in especially short supply. Movers and shakers are expected to see these equipment shortages carry on through the first quarter (Q1) of 2021. Container shortages have caused major operational problems since June 2020. The worst-hit areas are China, Vietnam, and the Indian subcontinent.

The problem isn’t only about finding space on vessels. It’s equipment and containers needed to ship products from Asia to North America and Europe after this year’s e-commerce boom and extended peak season and Golden Week keeping demand high and capacity a valuable commodity.

“Why Did This Happen? I Demand Answers” – Karen

The shortages seen on the subcontinent’s trade lanes are primarily due to the “shelter-in-place” orders imposed across India to stem the spread of COVID within the world’s largest democracy. The follow on effect is a severe export bottleneck. Now that restrictions have lifted, apparently, it’s ‘wine o’clock’ everywhere right now. Shippers have rushed to move products that have been sitting idly out of the country as soon as possible, and now they are experiencing an equipment shortage.

The equipment shortage issues in China and Vietnam are of a different variety. Remember when liners were issuing a ton of blank sailings earlier in the year? Like, over 100 of them? Well, those have created quite the domino effect. Great, now I’m craving pizza.

These blank sailings resulted in empties not being positioned back to Asia from the US and Europe. Now that there is an increase of products being forwarded from Asia to the US and Europe (where the majority of empty containers remain), shippers are short of equipment.

And now we are seeing freight rates steadily rise. Because, why not?

I Dislocated My Chassis. Ouch!

Shippers and their customers feel like they’re taking crazy pills with the state of chassis shortages and the time it takes to free equipment up in California. It’s getting so bad that shippers are being threatened with legal action and, in some cases, physical violence.

Aside from personal safety, it’s becoming a serious problem on the US west coast as importers concentrate their imports through Los Angeles-Long Beach. LA-LB is the preferred import location because, during COVID, LA-LB allows importers to defer the final US destination until their shipments arrive at the port.

That and labor shortages have led to an average return time to increase by 1-2 days. It sounds small but multiply that by tens of thousands, and it has a significant effect on warehouses receiving and unloading containers and before returning them to the port.

That’s a lot of chassis, containers, trucks, and personnel sitting idle, waiting to make a move.

Is All Hope Lost?

No. 2020 has been a year of unexpected events, plot twists, and bizarre outcomes no one could have predicted, but empty containers are already on their way back to Asia. In September, more than 280,000 empty containers left The Port of Los Angeles on their way to Asia. That’s more than double the amount of loaded exports from the port in the same month.

As we close in on the holiday season, retailers are stocking their digital and brick-and-mortar shelves earlier than usual as consumers look to be shopping early this year to avoid crowds and, most importantly, shipping delays. And we at CargoTrans are here to help.

If you have concerns or questions on how this could affect your shipping plans, please reach out to our expert team. We are happy and ready to help.

#shipsimple

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