A significant surge in demand from customers and retailers is fueling traffic jams in ports around the world, leaving steamship lines with few options to avoid bottlenecks and the associated costs that come with them. Container carriers have not properly prepared for this increase in demand, and effects from the pandemic continue restricting their capacity to quickly adapt.
COVID-19 and 2020 Fluctuations
When the pandemic hit in late 2019 / early 2020, demand dropped off significantly and workplace restrictions left shipping and logistics companies with reduced staff. This slow period resulted in blank sailings where shipping carriers were unprepared to react to subsequent increases in demand later in the year.
When people were quarantined at home for months on end without the ability to go out and take part in activities like seeing movies or shopping in stores, they opted for shopping online instead. When demand increased, carriers could not allocate shipping containers fast enough or workers to handle the influx of goods.
Peak Season Without End
The increase in demand only rose with the holiday season, and the typical slowdown usually seen in the first quarter--post-holiday--never happened. The continuation of the peak season is in part due to China’s decision to work through the Lunar New Year and is also likely affected by the dispersal of stimulus checks.
Seventy-five percent of the 20 major container ports worldwide saw increases in cargo rollover rates in December compared with November, and Chinese ports are rolling over more than a third of containers arriving in its ports. As the ports and shipping companies fail to keep up with demand, container shipping rates have grown by up to nine times their normal levels. Although volatility in these rates is relatively normal even in previous years, the severity of the current fluctuations is unprecedented.
Current and Future Factors
Wait times at ports are averaging a full week, during which some perishable goods are going to waste, and the supply chain is suffering from a domino effect of inefficiency. The rollout of vaccines and more stimulus checks will likely only increase online spending and retailer restocking, meaning shipping companies should not expect demand to take another significant dip any time soon.
The logistics industry still needs to contend with a shortage of containers, equipment, workers, and truckers, but investments in ameliorating these issues are vital for recovering from this global congestion. Waiting out the blockage would only cost more, as slowdowns are expected to continue well into the second quarter. If the supply chain does not begin to recover soon, delays could encourage consumers to stop ordering products, leading to further profit losses in the long run.
The importance of reinforcing and improving supply chains has never been more prevalent than it is now. While the pandemic has brought to light the significance of supply chains, it has also shown us how vulnerable and fragile they can be. International logistics experts, like ClearFreight, specialize in strengthening supply chains and making them easier to manage by taking over the day-to-day operations. Contact one of our experts today to learn more about our supply chain solutions and how they can be tailored to your needs.