The freight shipping world continues to go through its gyrations and disruptions that started with heavy impacts in Spring 2020. Now, in the latest chapter of issues, the cost of freight shipping out of China to overseas destinations has skyrocketed. Combined with a systemic shortage of containers internationally, the price tag on moving a container went from $2,000 at the end of 2019 to a whopping $9,000 per unit. But the demand is not being driven by price-gouging on the service side. It’s a far simpler matter of not having enough containers to move goods with. As a result, inventory that needs to be shipped to meet orders is piling up at the docks because there isn’t enough equipment ready to stock, store and load with.
And locally here in New Zealand the Ports of Auckland have suffered “swamping”
a perfect storm of interconnected disrupting circumstances has caused significant congestion and delays at New Zealand’s ports.
How Freight Containers Move and Why 2020 Was Different
Mechanically, shipping containers have to move in a circular pattern year-round. As goods move out of Asia, the shipping container used to move them relocates to the U.S. or Europe as the destination point. As the cargo boats move back to Asia to pick up more goods again, they either carry inventory headed back to Asia or they move empty units, but the returning container stock replenishes the numbers for new, outgoing orders. However, when 2020 hit with the pandemic lockdowns, the circular pattern and frequency of international container replenishment were disrupted. Instead, thousands of large size containers sat in dock areas at their original destination points without moving back to China and similar. When overseas trade started to pick up again going into the fall, there were few containers to work with and no new ones built fast enough to fill in the gap.
The congestion building up at ports waiting for equipment to ship adds to the problem, triggering more and more delays of freight shipping internationally. And, where companies and clients want their items to move faster, they end up having to pay a premium for that benefit versus waiting with everyone else. Those costs add up and have ultimately contributed to overall container shipping fees jumping 400 to 500 percent in 2020.
Fundamental Changes in the Freight Business are Pending
Eventually, the supply of containers will even out again as shipping picks up, particularly now that a COVID vaccine is starting to make its way through societies and reducing the need for ongoing lockdowns. However, that transition back to normality will probably take another year, and shipping logistics in the meantime are going to be hampered on the international level.
Companies have not been sitting idly by. Many of the big inventory movers and freight shipping services have been investing their capital into increased logistical centre resources on the domestic side so they have the additional stock and resilience to handle supply-side shocks as occurred in Spring 2020. It’s been made clear to everyone that, while freight shipping has come a long way in the past decades, it is still very vulnerable to demand spikes, and improvements in container logistics are still sorely needed.