Explainer: container shortage and price increases for ocean cargo
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In this Explainer, we’ll examine the cause of the container shortage and how that creates price increases for ocean cargo.
You may have noticed that it’s harder to get a last-minute booking from a shipping company these days. You might also have noticed that your bill is much higher, too.
What is going on?
It’s a multifaceted issue impacting logistics companies, manufacturers, trading companies, and retailers alike: a worldwide container shortage due to Covid-19.
Lockdown phase impacts
The lockdown in March and April restricted economic activities. As a result, the number of port laborers was reduced and, by extension, the speed of cargo handling. Some factories temporarily closed, causing a large number of containers to be stopped at port.
Since movement of cargo was limited, shipping lines tried to stabilize the cost by reducing the number of ships.
Increased demand, decreased supply
By July, the world’s economic activities started to recover. Demand for container space rose again and kept on rising, especially as North America neared the holiday season.
But, there were fewer containers to be found because during the slowdown, shipping companies were not able to retrieve the empty containers.
Shipping companies are trying to solve the problem by reducing free time and detention (essentially, the length of time allotted for pickup and removal of containers). They are trying to speed up the time it takes to collect, unload, and return the containers.
Manpower issues
But this is running up against another issue in North America, where ocean cargo is collected at port and then taken inland by trucks. The truck driver shortage is slowing down how long it takes for a container to return to port. Normally it takes one to two days, but now it can take a week or even two.
This container shortage is leading to price increases for shipping by sea, in some cases even doubling the usual cost of freight.
Logistics experts are expecting this situation to persist at least until after the surge of exports from Asia that precede Lunar New Year (spring of 2021), although it is difficult to predict, given the unprecedented nature of this pandemic.
Cole’s advice to shippers is to give your logistics partner as much notice and lead-time as possible to ensure their ability to find a container for your goods.
With more than 60 years of freight experience, our logistics professionals can take the stress out of international shipping. Contact us today.
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