By: Christopher Sirota, CPCU
The surge of consumer shopping during the pandemic, in part, has apparently pushed the global container shipping industry to record-levels of activity that have clogged ports and raised rates—and of course COVID-19 has reportedly hindered the port workers who face the challenge of processing these containers.
Delays, Delays, Delays
Bloomberg reported that the global shipping industry is handling 20-30% more cargo than usual, which, combined with effects of the pandemic, is stressing processing capacity and causing delays. For example, per the article, during the same period last year on-time arrivals from England to China were at about 80%, but at the end of 2020, that dropped to 50%. Ontime arrivals in 2020 dropped to 30% for shipping from China to Europe. The article included a quote from a Costco Wholesale executive who estimates the delays and related container shortages—since containers cannot be re-used if stuck unloaded in congested ports—would continue for several more months.
Bloomberg added that costs have increased as well. For example, costs for shipping a container from China to Europe tripled to $4,400 in December 2020 compared with the same period in 2019.
In a related article, the Financial Times noted that some ports have faced delays because of staff and truck driver quarantining, social distancing, and illnesses. In addition, per The Times, some shipping lines actually cannot handle the demand. For example, the article explained:
In response, [some] shipping lines are cancelling orders and diverting vessels.
Singapore, the world’s second largest container hub, saw its rollover ratio — the proportion of cargo arriving at a port that is shipped on a different vessel than originally scheduled — reach 31 per cent in October , compared with 21 per cent at the same time last year, according to data provider Ocean Insights.
Here are more examples of some of the effects of the container shipping logjam.
U.S. East Coast
The Wall Street time has reported that one of the main ports in the New York - New Jersey area received over 430,000 containers during September and October 2020, which represents a record high and an increase of 18% compared to the same months in 2019. Approximately 15,000 truckers typically move the shipments from ports to warehouses, each reportedly making three to four trips daily; however, due to the overflow of containers on the ports, longer wait times have caused that daily number to dwindle to one or two trips.
The article added that redistribution "warehouses are full, and the logistics companies that run them are renting nearby parking lots to store the stockpiled inventory."
Further comparisons to last year at the same port include the following, per the article:
CSA Transportation lists the port of Los Angeles as the largest shipping port in the U.S. Per the previously mentioned Bloomberg article, the Los Angeles port has become so congested recently, in December 2020, almost 20 container ships were waiting to unload cargo; in November 2020 there were only about 12. At the end of December 2020, the port expected to handle about 152,000 inbound containers, which represents an increase of 94% compared to the same week in 2019. In January 2021, NPR reported there were about 30 ships waiting offshore.
A separate Wall Street Journal article has reported that exporters in China are facing shipping challenges due to the global delays at congested ports.
According to the article, "[m]ajor U.S. ports imported 2.21 million 20-foot containers in October , up 17.6% from a year earlier and setting a record since the National Retail Federation began tracking imports in 2002." Delays have reportedly increased shipping round-trips from China to the U.S. from the typical 60 days to about 100 days.
In reaction, prices have also reportedly increased. For example, per the article, one textile manufacturer explained that shipping a single 40-foot container from China to the port of Charleston, South Carolina increased from $2,700 in April 2020 to about $7,500 in December 2020. The article also mentioned a toy distributor in China was told to temporarily stop shipping to clients because the shipping costs were too high, reducing profits.
Notably, there appears to be some difficulty in addressing the shortage of container availability caused by the congested ports. The Journal explained that China builds over 95% of all containers and even the world's market leader in container manufacturing based in China recently "told investors in November  that its factories are fully booked until the end of March ."
Of interest, companies that normally ship via air cargo apparently have also been experiencing the effects of the container shipping delays. For example, The Journal explained that one e-cigarette producer in China that normally ships its products by air, suddenly faced competition for shipping service with companies that switched to air shipping to avoid the container delays; that competition naturally pushed air shipping rates up. As such, per the article, the air shipping rates increased in December 2020 by 30% compared to the same time in 2019, causing logistics costs for the e-cigarette company to grow from about 1 to 2 % to about 5% of overall costs. Since demand for vaping products reportedly continues to be high during the pandemic as people remain indoors, the e-cigarette producer is reportedly considering ways to make its products in regions closer to its customers, such as in South East Asia and Canada where e-cigarette markets are growing.