The 2021 Shipping Crisis Explained
The global shipping crisis that has gripped the sea freight industry since 2019 is predicted to continue far into the future, with multiple challenges that continue to delay and challenge supply. The COVID-19 pandemic itself presented a host of issues, many of which could not be predicted but threw significant spanners into the logistics of businesses all across the world. With so many contributing factors and considerations to make as maritime transport businesses wade themselves out of the midst, it seems that this global disruption may continue for many months to come.
What is Causing the Shipping Crisis?
There are numerous causes for the low supply, high demand maritime shipping crisis that we find ourselves in.
Key factors include:
- Shortage in shipping containers
- Congestion in ports
- High demand for international trade
Shortage in Shipping Containers
There is currently a global shortage in shipping containers which have driven significant inflation and an increased delay for many companies. When the pandemic hit in early 2020, countries all over the world began to implement measures to prevent the virus from spreading. One of the most widely used precautions was the implementation of national lockdowns. Businesses globally were forced to close their doors, individuals instructed to stay in their homes and life as we know it came to a halt. In turn, this led to container manufacturers shutting shop and orders for new containers being put on hold. Those that were able to continue supplying significantly reduced the number of containers they were able to supply due to a lack of employees and, therefore, orders fell short. In turn, shipping companies were forced to dock their vessels and prevent shipments from moving across seas. Empty containers that were due to be collected were left – another factor impacted by cross-contamination and a ban on goods moving between certain countries.
Congestion in Ports
In response to the already increasing demand in online sales and international trade, ship manufacturers turned towards larger vessels. Between 1980 and 2020, the deadweight tonnage of a container ship has increased from 11 million metric tons to around 275 million metric tonnes. This was always done to help make individual shipments more cost-effective – larger vessels can use slow steaming, reducing CO2 emissions and allowing more cargo to move with each shipment. However, in line with the shipping crisis, it has put increased demand on traditional ports. Most aren’t being suitably renovated, meaning they are unable to accommodate larger container ships. And those that are being expanded are costing excessive amounts. The Panama Canal, for example, was expanded in 2016 and cost approximately $5 billion. When we look at the significant impact that the wedged shipping container, Ever Given, had on global trade (the Suez Canal sees upwards of 50 ships pass through and accounts for 12% of global trade), it becomes clear why larger ships can present such significant problems.
Ports across the UK are also still receiving a backlog of vessels that were originally cancelled or delayed when the international lockdowns came in March 2020. This has been accentuated by a lack of certainty – businesses are reluctant to pay the higher shipping fees and trust in the logistics with the risk of further delays or shutdowns continuously possible.
High Demand for International Trade
Our dependency on online sales has been rising steadily over the past decade. But the pandemic accelerated this. The sudden and significant increase in demand for PPE, including protective masks and face coverings, was counteracted by the lack of shipping containers moving internationally. Alongside this, the closure of many brick-and-mortar stores meant that our ‘essential shopping’ needs were satisfied from online stores. More and more businesses began to discover the importance of having an online presence to continue their business – and, indeed, this was one of the key reasons why many businesses managed to stay afloat during this time.
How Long Will the Shipping Crisis Last?
The outlook after the 2020 pandemic may be looking brighter. Lockdowns are easing globally, businesses are back to trading and ports are opening back up. However, since the shipping crisis has been triggered by so many different factors, it is unlikely that this crisis will come to an end any time soon. Experts are debating whether this was a direct result of COVID-19 or whether it is a sign that the sea freight industry will be hard-pressed to keep up with the increasing demands of our modern world. The increased demand in international trade will likely continue to rise – especially in response to the uncertainty surrounding our approach to large-scale health concerns. While this necessary expansion has been long known, it has never come to the forefront of importance in the same way.
Managing the Crisis as a Business
The shipping crisis isn’t going anywhere fast. And, what you need to do is find practical ways to manage your business logistics in turn.
Good customer service is the best way to work through complications such as significant delays. Being transparent with your customers from the beginning of your relationship can reduce upset and confusion in the future.
Recognise that some of your normal delivery lead times may be stretched as a result of the delays. Make sure your customers know that delivery dates may change but that you will keep them informed as soon as you find out. Equally, if you’re planning on launching any new products, understand that your original schedule may not stay exactly as planned.
Consider expanding your returns and cancellation policy during this time. Or to make sure they get the goods for special occasions, consider absorbing the costs of expedited shipments.
At Radius Warehouse & Logistic Services, we have over 25 years of experience supporting businesses with their logistic solutions and worldwide cargo movements. During the shipping crisis, we’re here to help you find the most optimised routes and ensure your shipments move as smoothly as possible. If you have any questions or would like to speak to one of our specialist team, please do get in contact here today.