The coronavirus pandemic of the last year and a half has caused a lot of substantial changes in the way we live our lives. Business transactions and shopping now primarily take place online, and while most people have felt the personal effects of this large-scale shift, the average consumer may not be aware of the wider consequences, particularly as it relates to huge recent increases in the cost of shipping.
So, what is causing this staggering spike in shipping costs? One key factor is the sudden shortage of shipping containers, otherwise known as the current shipping container crisis. But how did we get to this point? And what does the future look like in terms of shipping and transporting goods from nation to nation around the globe?
In this article, we will look at what the shipping container crisis looks like today, what brought us to this current shipping container state of crisis, and how we can adapt for the future of international transportation.
The Shipping Container Crisis- Where Are We Now?
Some savvy home shoppers who are paying close attention might have realized that the cost of shipping has increased a huge amount recently. According to CNBC, the cost to ship items from Asia to the west coast of the USA has risen by a whopping 145%. The price of shipping a 40-foot container from Asia to Northern Europe, meanwhile, has increased by $7000, from $2000 per container to $9000 per container.
With China finding it more economically advantageous to send out empty shipping containers as small and medium-sized businesses suffer from a lack of shipping container resources; the situation of combined pressures has created a perfect storm of chaos and pressure on consumers and local companies.
How Did We Get Here?
The coronavirus pandemic has created a new marketplace, boosting the demand for home office supplies and other imported goods, ordered online for cheap prices. Most of these goods purchased by American consumers are shipped from China, which has contributed to the disruption of global supply chains and a trade imbalance. China’s trade economy recovered quickly from the effects of the pandemic, in part due to the huge increase in demand for cheap consumer goods. China began exporting roughly three containers full of goods for every one container that was imported, creating a huge imbalance.
Because of the extended effects of the coronavirus pandemic, global shipping lines have head to contend with a shortage of in-person labor around the world, delays in both imports and exports, and further issues. Logistical systems have been running at reduced capacities while some freight cargo has been held in quarantine at particular ports, leading to huge congestion and creating a domino effect of backlogs and holdups.
The delays in the shipping lines themselves have created a shortage of available containers so that China has more products to ship than they do containers to ship them in. Each trader offers higher prices for shipping containers so that they can move their goods, rather than stockpiling the products despite the sky-high consumer demand. Where the average time it took to repurpose a shipping container used to be around 60 days, the process now takes 100, creating a backup in the entire global shipping network.
Because of the backlog and limited availability, China has to pay high rates to get the containers returned from their import destinations. It has become more lucrative for shipping lines to return the containers to China than to accept more bookings for deliveries in the West. So, shipping lines have begun to prioritize more profitable requests, at the behest of small and medium-sized businesses attempting to move goods globally. The lack of supply of shipping containers and the heightened cost and demand has led to a huge rise in shipping costs. Consumers now pay three or four times the amount they would have to ship items from other countries.
The Future of Shipping Containers
As with most industries, the future of shipping containers is dependent on a number of factors: increased reliance on digital tools and up-to-date technologies, better and clearer communication, a more globalized approach, and greener initiatives.
To circumvent some of the delays and blockages caused by the current crisis, shipping companies can utilize an expanded international trade network, incorporating more alternative ports to move goods. An increase in manufacturing in areas like Vietnam, Thailand, India, and parts of Africa would help smooth out some of the congestion, backlog, and trade imbalance that is currently plaguing international trade line systems.
New and improved customs processes can also play a role in decreasing the likelihood of backlogs and congestions, helping containers and goods to move through ports with greater speed and ease. Digital communications tools can be implemented to help customers track packages more easily, and also to help improve communication among port authorities, ship captains, and warehouse workers.
Manufacturing companies in countries other than China may step in to create more shipping containers as well, thus lessening the gap between supply and demand. This would go a long way towards lowering the prices that currently present shipping lines with imbalanced profit options.
With e-commerce continuing to thrive and expand, it certainly seems like the demand for inexpensive manufactured goods shipped from around the globe daily will continue to grow. The shipping industry will need to adjust as a result, or risk facing an ongoing shortage of shipping containers to keep up with the heightened consumer demands.
Using a broader geographical network, new manufacturing areas, and the latest in digital technology, the shipping industry should be able to bounce back from the current crisis. Which would mean good news for consumers and small businesses, as they will hopefully no longer bear the brunt of the heightened shipping costs.
About the author
Marianne Holt has 7 years experience in distribution and the shipping industry. More recently she has been blogging and writing on relevant developments, with a particular interest in technology in the shipping sector.