The term "unprecedented" gets thrown around a lot, but that word in fact seems quite apropos to what has been happening for months in the ocean container shipping sector.

Supply Chain Digest Says...   Carriers now appear to be onboard to help mitigate the supply chain crisis, Drewry concludes, but notes it seems likely to last until at least 2Q21.     What do you say?   Click here to send us your comments       Click here to see reader feedback

After soaring in the second half of 2020, rates keep heading hire at the start of 2021. East to West spot rates jumped by another 23% after three weeks of the new year. That after the Drewry World Container Index, which measures an average of costs to ship a 40-foot container across the globe, rose from about $2000 in early last July to almost $5000 by year's end.

And the various rate indices out there don't factor in the extra costs many shippers are paying for "special services" needed to secure an empty container and a berth on a vessel in a timely manner.

The situation is unlikely to significantly improve in coming months, the analysts at Drewry say, commenting that "It seems likely then that cargo owners will have to endure these very high freight rates for some time, but we might see some of the more outlandish 'premium' rates disappear much sooner."

At least the latter is a bit of good news for stressed and over budget container shippers.

On the special services offerings, Drewry says the congestion at large ports is still so bad that many carriers will be unable to meet their premium service guarantees and owe customers that bought the service guarantees big refunds.

Drewry also says the terrible conditions and delays may cause some companies to reduce orders that require container shipping, though it would seem most can't adjust their supply chain fast enough.

But to the extent that is true, it means carriers may be almost as interested as shippers and importers in solving the container shipping problem.

In order to avoid delays and improve port congestion, Drewry "expects carriers to adjust their operations down to fit with the struggling landside operations, giving them space and time to get right," adding that "This will involve more flexible services that avoid the most congested locations.

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Drewry spoke to a number of carriers, and published a consolidated list of actions they are taking to alieve the current situation:

• Deploying all available vessels, both owned and chartered

• Significantly higher investment in new and second-hand containers

• Abandoning blank sailings related to Chinese New Year and instead use the sailings to reposition empties

• Shifting allocation between lines and ports to match demand with equipment availability

• Faster turn-around times for containers (release control, early returns, low empty dwell time)

• Maintain a close dialogue with authorities and unions to solve the challenge of safely replacing vessel crews and increase personnel in ports and inland terminals/warehouses.

Effective Capacity Changes in the Eastbound Asia to

West Coast North America Container Trade

Source: Drewry

Another interesting note from Drewry: The huge spike ecommerce trade has reduced the amount of available warehousing space and one carrier told Drewry that they have seen more containers being used as an extended storage/ad hoc warehouse capacity that is contributing to the delays in container turn times.

"Carriers now appear to be onboard to help mitigate the supply chain crisis," Drewry concludes, but notes "it seems likely to last until at least 2Q21, which will mean highly elevated freight rates in the meantime."

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