There are many positives to globalization, but a negative is that when something goes wrong on one side of the world, the issue can ripple throughout multiple countries in unexpected ways. Quite literally, a storm over the Pacific Ocean that results in cargo being lost at sea can lead to a restaurant in the United States experiencing extreme delays when waiting on their new patio furniture to arrive. It’s likely that someone in the U.S. who is expecting furniture to be delivered in a timely and affordable manner would not immediately think that problems in China would be crushing those expectations, but that’s exactly what’s happening right now.
Actually, it all started when the whole world had to shut down collectively. We all know that industries across the board slowed or even stopped usual operations early into 2020 as COVID-19 began its spread. Most factories temporarily closed, starting in China. Logically, shipping carriers responded by idling vessels and most orders for new shipping containers were canceled.
After the shutdown, in another unexpected turn of events, demand for consumer goods actually boomed. This was mostly caused by money that was normally spent on services (at restaurants, theaters, hotels, and so on) being used to purchase products instead; products that need to be shipped. With a large amount of the global population stuck at home, people began buying things to make this a more tolerable experience: furniture, outdoor decor and equipment, office supplies, and electronics.
This resulted in factories suddenly resuming operations and exporters fighting for space aboard cargo ships. Basically, this surge in demand overwhelmed the system and there is now officially a global shortage of shipping containers. It’s hard to imagine that, considering Politico reports there are an estimated 170 million shipping containers in the world, but it’s true.
China was able to get the virus situation within its borders essentially under control by the second quarter of 2020, while Western countries are still struggling to do the same. This has left many shipping containers stuck in the U.S. and Europe when they’re really needed in Asia. So, although there are a large number of shipping containers in the world, simply put, they’re currently not in the right places and the right times.
Since the pandemic, fewer ships come into U.S. ports, which also means fewer shipping containers are available to return to Asia. The demand to send goods from China to the U.S. and Europe is much higher than the other way around. Because of this, some ocean carriers are no longer waiting for their containers to be fully reloaded with U.S. exports before returning them to China where they are desperately needed. Even with these rushed processes, it is still a struggle to get international goods into the U.S. in the timely fashion we’ve all become accustomed to.
The container shortage is too complicated for it to be blamed entirely on shipping issues stemming in Asia. Another world event, Brexit and the U.K, border disruptions it has caused, has also created issues in the supply chain. Domestically, the U.S. transportation industry is lacking a robust workforce. Like in many industries, employees were laid off or let go during the shutdown and it has been a real struggle to rebuild what once was. It’s also not an industry that people naturally flock to as the jobs, though they pay well, require hard work and long hours. This absence of the appropriate number of employees is stunting overall ability to keep up with demand and reopenings. Plus, the pandemic has hit the supply of steel and lumber, which are needed to build more shipping containers. This mess certainly emphasizes how interconnected industries are.
So, if we really are all connected, how does the container shortage affect you? There are two resulting issues affecting both retailers, and in turn, their customers. The first is timing. According to Ocean Insights, more than one-third of the containers transiting the world’s 20 largest ports failed to ship when scheduled during December 2020. As a result, companies have had to wait for their containers to arrive for weeks at a time. One of the only solutions for getting containers to ship faster is to pay more. Although that’s not always an option, it does lead us to the second issue, which is increased costs. According to the Freightos Baltic Index, there has been a 165 percent increase in prices over the past year. Just between early January 2021 to February 5, shipping container prices rose 63 percent!
Another thing that’s driving prices is that some companies have resorted to shipping via plane. Airfreight capacity is limited at the moment, adding to the high costs and slow delivery, because companies typically use the extra space at the belly of passenger planes to ship. With so few passenger flights occurring in 2020, you can see why this caused problems. In a nutshell, there is an overall lack in shipping options, all while demand is rising at unpredicted rates.
Again, if you’re not in the fray of the furniture industry, you probably wouldn’t know that teak manufacturers heavily rely on shipping containers. Maybe you were unaware of the shipping container shortage altogether. This just leaves you to wonder why on earth your patio furniture hasn’t turned up yet. Or maybe you never even made it past the shopping process because of rising costs, not knowing this is also a result of the crisis. The reality is that the container shortage affects all companies that need to ship goods and all customers who are waiting on the other end. Unfortunately, these issues are likely to continue as long as the pandemic does. Consumer buying patterns will have to return to normal for us to see any real progress in the supply chain bottlenecks.