The origin
When the Covid-19 outbreak developed worldwide, its impact was felt on international trade through an initial slowdown:
At this point, demand for capacity and services was expected to fall.
What happened instead?
Contrary to expectations, demand for container shipping has increased due to many factors, among which changes in shopping habits (such as the growth of e-commerce) and a higher request for manufactured consumer goods, mostly produced in Asia and moved through ocean freight using containers.
With the sharp reduction of available flights, and the ease of lockdown measures ran by many governments, the demand for container shipping increased further. Also, businesses played a role: as a matter of fact, many of them tried to stock up goods to anticipate the disruption of supply chain that could arise from new waves of the pandemic.
At this point the shipping capacity was lower than demand: rates started to increase, blank sailings and delays accrued the difficulties at ports and shortage of equipment started: empty containers were left in places where there was no demand and repositioning had not been planned for.
Port congestion in the U.S.
By the end of 2020 and the beginning of 2021 U.S. West Coast ports started facing hard congestion. The causes can be found in:
On the East Coast the same situation evolved due to the reduced number of flights, the consequent increase in demand for air service, labor disruption and infrastructure problems.
This created huge bottlenecks at all major US ports. Vessels wait offshore for several days for their turn to unload. Containers are buried in huge stacks at terminal yards. Trucks wait for hours (and sometimes the whole day) in line to pick up one container; at the same time trucks also need to wait to drop down empty ones which wait for a repositioning plan to be applied, thus increasing the equipment shortage.
Customers undergo strong delays of shipments and this situation bounces back on supply chains as a barrier both for imports and for exports.
The current situation
The Suez Canal accident, in which more than 300 vessels remained blocked for a week waiting to pass through the canal, accrued the difficulties causing congestion at the major European ports, increasing delays, blank sailings and empty containers shortage.
Consequently, also air freight request jumped up.
As far as the ocean freight is concerned, the Far East – Europe and Transpacific routes are currently at a critical point facing extremely serious capacity crunch, equipment shortage, high demand and blank sailings. The backlogs are pushing carriers to restrict new bookings. Due to high demand and low availability, rates are increasing, and we expect this trend to continue over the next weeks.
On the Europe-North America route carriers are also facing equipment shortage, blank sailings and delays due to congestion at US ports. Consequently, rates are increasing, and bookings need to be done at least 5 weeks in advance.
Concerning air freight, the export situation in Europe, Asia and the Americas remains strong due to high demand, and low belly capacity. In Asia demand stay at super peak levels seen only during May 2020. In Europe and the Americas, space in flights to India and Bangladesh is very low, due to aid and relief shipments into the COVID-struck countries.
What to expect
For the next few months, capacity constraints are expected to continue impacting both air and ocean services.
On the one hand, forecasts give container shortage to be likely to last until 2022, not having enough empty boxes in the right places to handle cargo demand. Furthermore, Suez Canal accident and India situation are adding in further disruption to the already extreme situation, not helping the repositioning of empty equipment. Moreover, it is expected that container producers will not increase boxes production fast enough to fully ease capacity crunch, thus maintaining the demand high and the availability low. The expected consequence is a further increase in rates, which are already skyrocketing, pushing on the other hand demand for air freight service, which will suffer for low availability until international regulations for Covid prevention will allow again passengers to travel without restrictions.
Concerning the United States, data forecasts show import demand to be likely to increase over the next months. This would have the effect of accruing the already difficult situation of ports, which will still face severe congestion.
How can D.B. Group help you
The above described situation is for sure a challenging one when it comes to find the right solution to match one customer’s needs.
At D.B. Group, our experienced staff evaluates each case, analyzing alternatives to offer the perfect solution to optimize processes and flows, matching our customer’s business needs.
With our network of 49 offices worldwide we can guarantee full support from consultancy to operations for international freight, logistics and customs related requests.
Contact us to know more about the opportunities.
D.B. Group
