Freight shipping is in the midst of a perfect storm, rising shipping costs and rising container costs.
A global pandemic, soaring demand, a shortage of containers, saturated ports, too few ships and dock workers have led to a worldwide container shortage creating a crisis that’s being felt along the entire supply chain along with rising shipping costs.
In the UK, these unprecedented times have been exacerbated by the added complication of Brexit.
The result? Rocketing container prices.
According to a recent article on BBC online, Helen White (founder of start-up Houseof.com) said that in November 2021, she was paying £1,600 per container, whereas now that’s jumped to £10,000. It reported that the problem stems from the shortage of empty shipping containers in Asia and bottlenecks at the UK’s deep seaports.
Where are all the containers?
It all started with a virus.
As the pandemic spread from its Asian epicentre, countries worldwide began locking down, stopping economic movements and production. With factories closing, large numbers of containers were stopped at ports, which had the knock-on effect of reducing the number of ships at sea.
Not only did this halt imports and exports, but it also resulted in empty containers not being picked up.
While the world battled Covid, Asia began to recover from the effects of the pandemic and resumed exports. However, the rest of the world was still experiencing restrictions. That meant the remaining containers sent from Asia into Europe and North America went one way only. This sudden shift in the direction of trade meant containers were stuck in the West while the demand for them was in the East.
Coronavirus restrictions and resulting sickness levels caused containers to start piling up in ports, and tightening at borders added to the congestion.
On top of the bottlenecks and trading issues, the production of new containers is extremely low. So, the limited access to available containers is driving the price hikes as we mentioned at the beginning of this article.
Rising shipping costs, is the end in sight?
There are no easy fixes.
According to moneycontrol.com, “Top shipping and ports industry executives and analysts have warned over the past few weeks that the crisis may persist for another year, even though the world’s largest container shipping companies such as Hapag-Lloyd and CMA CGM are augmenting their stock of containers.”
They went on to warn that this alone won’t solve the crisis because “The entire supply line is broken due to shortages of workers, missing truck drivers, contraction of the fleet on container ships and related reduction in the availability of slots on container ships and the imbalance in trade flows.”
The flow of empty containers back to exporting countries must be normalised. However, it’s more lucrative for shipping companies to transport full boxes than hauling empties back.
The hope is that, as we emerge from the pandemic and life returns to normal, demand will reduce, giving the logistics industry some breathing space. As staffing levels return to normal, goods can begin to move once more with the efficiency we saw pre-Covid.
In the meantime, the higher prices look set to stay in the short-term.