Shipping industries: Logjam deepens in ports around the world as pandemic hits shipping

Tower cranes are working overtime swinging containers from cargo ships in China’s eastern port of Lianyungang, rushing to stay ahead of a perfect storm triggered by the pandemic which has created an impasse in global shipping.

As the huge containers were thrown onto trucks with a deafening noise, Shi Jiangang, a senior official at Chinese shipping company Bondex Logistics, reflected on the backlog.

“It has been a very big challenge,” he said.

The vessel being unloaded was a South Korean vessel which normally also carried passengers but which was fully delivered to cargo. In the distance, a fleet of other ships waited offshore.

Lianyungang is not alone. The global shipping network that keeps food, energy and consumer goods in circulation – and the global economy afloat – faces its biggest stress test of memory.

Maritime commerce has come under a microscope after a Japanese-owned mega-hip failed in the Suez Canal, blocking the busy canal for nearly a week. It was bailed out last week, but the larger crisis remains, amid warnings that soaring freight costs could affect the supply of key goods or consumer prices.

The situation arose last year as the expanding pandemic scrambled the sprawling and predictable patterns of shipping containers being shared around the world’s ports.

When many countries began to ease Covid-19 restrictions late last summer, a surge of pent-up demand from smothered consumers and mocking internet shopping rocked supply lines. Exports from countries like China have skyrocketed.

Port stacking

But since late 2020, ships have piled up outside overcrowded Western ports, leaving Asian exporters to demand the return of empty containers needed for new shipments.

In Lianyungang – China’s 10th busiest port, according to the World Shipping Council – desperate companies are putting rail freight containers into ocean service, placing urgent orders for new ports and redirecting some shipments to other Chinese ports.

The price to ship a 40ft

of Lianyungang in the United States has climbed to more than $ 10,000, from the usual $ 2,000 to $ 3,000, Shi said. The situation “puts pressure on everyone in the supply chain,” he said.

Demand from American consumers has been a key driver. The Port of Los Angeles said last month that the volume processed in February jumped 47% year-over-year, the strongest February in its 114-year history. The number of empty containers stranded there has also skyrocketed.

A Los Angeles port official told AFP last week that more than two dozen ships were waiting to dock outside Los Angeles and Long Beach, the two busiest ports in the United States. Normally there is no waiting, but delays are on average over a week.

“We basically have a few weeks of work, but more and more ships are arriving every day,” another port official on the west coast told AFP. To compound the stalemate, many container ships had been taken off the market for refit to meet carbon emission reduction standards, while social distancing and occasional coronavirus clusters among dockworkers also slowed down processing. .

Port of Los Angeles executive director Gene Seroka recently said the facility is focusing on vaccinating port workers and moving cargo. “It is essential that we eliminate the backlog of goods and bring more certainty to Pacific trade,” Seroka said.

Commodity information provider S&P Global Platts said ships were also stranded in Singapore, the world’s busiest container transshipment port, and reliability of sailing schedules was at their lowest in 10 years.

However, not everyone is complaining. Denmark’s Maersk, the world’s largest container carrier, went from a loss in 2019 to a profit of $ 2.9 billion last year, in large part thanks to soaring volumes and rising prices. prices in the last quarter of 2020.

But concerns are growing. The director of the Federation of German Industry, Holger Losch, said in a statement that the situation was starting to hit German industry.

“Sectors that depend on the delivery of raw materials or components, as well as the shipment of their finished products… are particularly affected,” Losch said.

Meanwhile, small export-dependent countries from Southeast Asia to Latin America, served by lower priority feeder roads, are struggling to get their products to market.

One-two punch

The double punch of the pandemic and the backlog of the Suez Canal have sparked a conversation about needed reforms in the shipping industry, in particular the need for further digitization to smooth flows and help respond to crises.

The current arrangements “have proven to be increasingly awkward … and equally inefficient and costly in dealing with changing demand,” said Vincent Clerc, CEO of Maersk for Ocean and Logistics recently.

The long-term impact on trade and consumers remains difficult to predict as no one knows for sure when the situation will improve or if it is likely to get worse.

Jon Gold, vice president of supply chains at the US National Retail Federation, said the arrears are expected to spread to the US east coast, in part due to the Suez lockdown.

So far, large U.S. retailers have largely absorbed the additional transportation costs, but consumers should feel the pinch at some point, he said. Estimates range widely from a few extra weeks of backlog to several more months.

“Who knows what happens when you come out of a pandemic?” Maersk CEO Soren Schou said at a recent conference. “I don’t think any of us who are alive have tried (this) situation.”