Shipping Container Shortage and Rising Freight Cost

Shipping Container Shortage and Rising Freight Cost

Why is there a container shortage? Every company engaged in the international trading business has recently come across a problem of increasing freight costs and limited available space on vessels. The global shortage of containers has led to a rise in freight rates by almost 60%.

Other reason for container shortage

1. Covid-19

The pandemic is the main cause of the recent container shortage as it entailed a sequence of events resulting in the lack of containers to load goods into. Worldwide lockdown measures to prevent the spread of coronavirus resulted in an economic slowdown. Under such a condition the workflow in ports was reduced and this caused slower handling of cargo. In addition to that several factories and businesses temporarily shut down. This caused a large number of containers to stop at ports. As a consequence, the shipping lines reduced the number of ships to stabilize the cost and avoid sending empty containers. Learn more about: Impact of Covid-19 on container shipping

2. Unbalanced trade and economic recovery

From July 2020 the worldwide economic activities started to recover but China took a lead in restoring the production of goods as early as April 2020. As a result, export volume from China increased immediately with a huge inflow of orders. However, the logistics structure available could not follow the rapid changes and newly implemented measures.

3. National holidays

The Chinese national holidays put the shipping business on further hold. In October, China rushed to boost its exports for the Christmas season with a stressed logistics situation. The large volumes of cargos had to be shipped from China to North America. While North America wasn’t ready to handle the volume smoothly and hence, congestions and delays started to add up. On top of that shipping, lines have already reduced the number of vessels to cut the losses of lockdowns which lead to a drastic increase in the freight cost.

4. Shipping lines regulations

The shipping lines tried to control the number of containers exported to China. Many have reduced free time and detention period and introduced a system to quickly collect containers, unload cargo and return the containers. For instance, some shipping lines have reduced their free time in certain countries from 14 to 7 days. However, the freight cost has almost tripled. 

5. Lack of manpower

Due to lockdown measures, there’s a lack of manpower and vehicles in North America. Normally when a vessel arrives, the container is collected for further transportation and returned within two days. However, now it might take up to two weeks after the vessel’s arrival to collect the containers. At times, the containers do not return for a long time because consignees are unable to take and bring the containers back quickly.

What to do?

The container shortage problem is an unusual matter and it will take some time to regain balance. Forwarders and shipping companies expected improvements by February or March 2021. There has been improvement but the recovery has been slow. We suggest that you plan your procurement process well and book cargoes as early as possible. Contact us to get information about procurement and sourcing services in India.

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