The headline from the New York Times this weekend says it all: "Chaos Strikes Global Shipping."
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That record price spike for container shipping is of course is great financial news for container lines, which have seen tough economic times since the global recession in 2008-09. |
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Over the weekend, the Times published an in-depth article by a quartet of Times reporters (Peter S. Goodman, Alexandra Stevenson, Niraj Chokshi and Michael Corkery) on the our container shipping madness seen now across the globe.
Container ships are regularly stuck for as long as two weeks at the ports of Los Angeles and Long Beach awaiting a berth to unload thir cargo.
There two important factors driving the chaos. First, consumer demand as soared after the tough stretch in Q2 of 2020.
Second, the Times notes that the pandemic and its restrictions have limited the availability of dockworkers and drayage and other truck drivers, causing delays in handling cargo from Southern California to Singapore. And in today's modern supply chains, delays in one area cause ripple effects across the globe.
Every container that cannot be unloaded in one place is a container that cannot be loaded somewhere else, with an extreme lack of containers throttling US exports, especially for agicultural products.
"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," the Times article notes.
"I've never seen anything like this," Lars Mikael Jensen, head of Global Ocean Network at Maersk Lines, the world's largest shipping company, said to the Times. "All the links in the supply chain are stretched. The ships, the trucks, the warehouses."
The story says that at India's port of Kolkata, shipping containers are in short supply, forcing manufacturers to first ship export good more than 1,000 miles to the port of Mumbai, where the supply of containers is better.
The volume of global trade dipped by only 1% in 2020 versus 2019 – but volumes were whipsawed throughout the year.
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Container volumes dropped more than 12% in April and May, only to see the volumes reverse themselves after that.
"The system could not adjust, leaving containers in the wrong places, and pushing shipping prices to extraordinary heights," the article notes.
The cost to ship containers of course have soared. The Times quotes one shipper saying he is now paying near $7000 to ship a 40-foot container from Asia to the port of Los Angeles, up from $2500 six months ago.
And that record price spike for container shipping is of course is great financial news for container lines, which have seen tough economic times since the global recession in 2008-09.
As an example, Maersk Line reported in February that it saw pretax earnings of more than $2.7 billion in its most recent quarter, citing record-high rates for container shipping.
The ocean service has become so bad the high-end stationary bicycle maker Peloton has announced plans to spend an addition $100 million in air shipping and expedited ocean freight. But with many other importers pursuing similar air cargo strategies, capacity is getting tight in that sector too.
And no one sees an end to this mess any time soon.
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