Export/Import Updates!
November 19, 2021

Shipment Delayed? Can’t Find A Container? Blame Peak Season Rush: Covid-19

Almost two years since the coronavirus outbreak, international trade is still in troubled waters. After lockdowns and widespread economic distress in 2020, importers and exporters continue to deal with pandemic-induced supply chain disruptions on an unprecedented scale in 2021. This is largely due to record import volumes in the United States and Europe ahead of the Christmas-New Year holidays as well as a second round of lockdowns. The disruptions are expected to adversely impact import-export volumes and make imported products costlier.

Predicting a 4.1% fall in maritime trade in 2020, the UN Conference on Trade and Development has warned that the drop could be steeper in 2021 due to further supply chain disruptions.        

This piece explains the current disruptions and how the shipping industry has been impacted.


Record Import Volumes 

What’s happening right now could be viewed as a perfect storm. Ports are overloaded, there aren’t enough containers and equipment to handle cargo, and freight rates have skyrocketed as a result. There are two main reasons for this state of affairs:             

  • A record spike in import volumes to the US and Europe from Asia. In October 2020, the Port of Long Beach handled more than 800,000 twenty-foot equivalent units (TEUs) of cargo in a single month for the first time in its 109-year history. A month later, Chinese imports to the US increased 46% year-on-year. There has been no let-up in container volumes this year as well. In the first nine months of 2021, the twin ports of Long Beach and Los Angeles dealt with 15.3 million 20-foot containers, a 25 percent increase from last year. Together, the ports handle 40 percent of US-bound containers. To deal with the record volumes, the ports are now working round the clock, with one Long Beach terminal open 24 hours. The shipping peak season, which comes before the holiday season, typically lasts from August to November. But this season is expected to stretch till the Chinese New Year in February and maybe more.
  • Booming e-commerce sales, with a pandemic-hit workforce taking to buying office and gym equipment for their homes. E-commerce accounts for a large volume of international freight. Around 25 percent more cargo was shipped from Asia to the US – the world’s second largest e-commerce market after China – in the first eight months of 2021 compared with the same period in 2019, according to Container Trades Statistics. Demand for consumer goods in the US has jumped 22 percent from February 2020 to August 2021, with a 74 percent increase in demand for imported toys, games, and sporting goods and a 49 percent rise for household appliances.

Current disruptions and how the shipping industry has been impacted

Let’s take a look at each of the disruptions affecting import-export operations. 


1. Container Shortage and trade Imbalance

  • Asia out of containers: With most trade geared towards US and European shores, Asia is facing a crippling shortage of containers. Importers are struggling to secure containers at Asian ports even on carriers offering premium services for premium rates. This shortage is mostly due to a pile-up of empty containers at US and European ports. According to a report by The Journal of Commerce, containers are stacked five and six high – the maximum permissible limit – at Long Beach and Los Angeles. To ensure empty containers are returned quickly to Asia, carriers have reduced free storage time, cut back on extra free days and are rejecting export bookings. In the US, some exporters have said shipping lines are refusing to send containers inland to pick up cargo because they are in a rush to send the empty boxes back to Asia to take advantage of the export rush there.
  • Chassis shortage in US: Due to the unavailability of 40-foot containers, most exports are leaving Asia in 20-foot containers. But US ports are terribly short on 20-foot chassis (trailers). This is because thousands of trailers bearing full container loads are waiting to be unloaded at ports, container yards and warehouses. In June 2021, the US government set up a Supply Chain Disruptions Task Force and launched an inquiry into the shortage of containers, chassis and other cargo-handling equipment. 
Two years of trouble on the high seas and in the shipping and global logistics space

  

2. Port Congestion

Shipping lines might argue that they are unable to provide accurate information because their schedules are in a mess. One reason for this is congestion at ports. 

  • Ever since trade picked up in July-August after the initial lockdowns were lifted, ports have been handling large cargo volumes without let-up. They now have their hands full with holiday shipments. This is one reason for the pile up of containers.        
  • At the same time, labour shortages due to Covid-19 persist. One shipping line pointed to a 10 to 13-day wait for vessels to berth at Auckland port and blamed it on a lack of port workers. 
  • The equipment imbalance has also contributed to port congestion.
  • In a vicious cycle, port congestion is leading to delays and extended wait times for ships, which in turn are adding to ports being overloaded. Thanks to congestion and delays, it now takes a container 70 days to get from Beijing to Chicago, more than double the normal 30-day period.
  • With winter setting in, cold season weather and storms have the potential to further hamper struggling port operations.

   

3. Carrier Schedules up in the Air

All this means carriers are struggling to keep to their schedules and are dealing with:   

Track all your shipping containers in one place

4. Shipping Charges Skyrocket

Carriers have responded to the strong consumer demand by increasing rates considerably and implementing a range of charges and surcharges. The fact that shipping company profits have touched record highs in the past two years have prompted shippers to accuse them of taking undue advantage of the situation.

  • Freight rates: In December 2020, freight rates were up more than 100 percent from a few months ago on key routes. The pain continues in 2021. Shipping costs rose over 300 percent year-on-year this August. Despite a drop in the following months, they remain steep. Experts expect rates to stay elevated at least till mid-2022. Atmospheric freight rates aren’t limited to ocean liners. Air cargo rates recently went up 10-fold in a single week. Truck/trailer rates have also gone up due to a shortage of drivers in some places such as the US.                      
  • Peak season surcharge: Carriers are charging hefty peak season surcharges on key Asian routes. These charges are upwards of $10,000 on some routes.      
  • Congestion surcharge: As of 1 November, 2021, Long Beach and Los Angeles are fining carriers for every import container that lingers at port for nine days or more. The charge is $100 per container, with an increase of $100 per container per day.   
  • Terminal handling charges: Air terminals have introduced new handling charges, including a $30.35 Covid charge at Heathrow and a per-kilogram import fee for loose cargo.

How SMEs can Weather the Storm

Trading amid such chaos can be a deal breaker for small and medium businesses. Some tips on how to make the best of a bad situation:

  • Plan your shipment well in advance. Add extra buffer time to account for delays, which are almost a certainty. 
  • Ship from larger ports where the container shortage might be less severe. This isn’t a guarantee though, so study your options.
  • Compare at least a few freight quotes to make sure you get the best price. Try Cogoport for instant freight rates and quotes.
  • If you can afford it, book a premium service that guarantees equipment and ship space.
  • Budget for additional costs – demurrage, detention and port storage – that can arise with delays.  

Communicate regularly with your trade partners. Try Cogoport if you require the services of verified and trustworthy freight forwarders and customs agents.

Editorial Team
Editorial Team
Customer success manager
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Customer success manager

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