Today, I want to explain the cause of current container shortages problem.
These days, container shortages have become a serious problem in the logistics industries.
This problem is not just associated with logistics industries. It also impacts manufactures, trading companies and retail businesses.
What is the cause of container shortages, and why are we unable to get space on vessels?
Explained Container Shortage reason in YouTube
Why does container shortage happen?
Slow down of cargo handling because of Covid-19
The reason for container shortages is Covid-19.
From the beginning of 2020, coronavirus is raging around the world, and then from March and April 2020, many countries entered lockdown.
When they entered lockdown, their economic activities were restricted, which also affected the people who work outside.
When we entered lockdown, the number of port laborers was reduced. This caused the speed of cargo handling to reduce.
Also, some factories temporarily closed, which caused a large number of containers to be stopped at port.
Reduced Vessels by Shipping Lines
As movement of cargo was limited, shipping lines reduced the number of ships to stabilize the cost.
Shipping lines would make losses if they continue to send vessels while they have no cargo. Therefore, they reduced the number of vessels to maintain the ocean freight.
China – early recovery from Covid-19
Most countries limited economic activities From April until June. From July, we were able to see that world economic activities started to recover.
Coronavirus started in China, which led to them setting Covid plans at an early stage. They have now managed to control coronavirus.
The infection rate in China is lower than Japan. Also, due to the support from government funding, Chinese factories were able to recover their production at an early stage.
When Chinese factories started to produce, it re-started exporting activities. This increased exports from China.
China was able to manage the coronavirus and they were able to re-start their production at their factories earlier than other countries.
This encouraged other business to try to produce in China, which increased export from China.
Christmas Business Impact in North America
Normally, from September, large volumes of cargoes are sent to North America for Christmas businesses. Large volumes of cargoes are shipped from China to North America.
There are approximately 900,000 by 20ft containers, sent from China to North America per month.
Chinese National Long Holiday in October
In addition to this, China has a long vacation called National Day of the People’s republic of China in October.
This leads to them trying to send cargo before the holiday starts. This drastically increases the volume of export from China as well.
Unable to return the empty containers
Also, as shipping lines were reducing the number of vessels, they were not able to collect empty containers.
Our company in Thailand was told to limit our export to China by shipping lines. On occasion, we were even refused to book large volumes of export.
I think the shipping lines were controlling the amount of containers exported to China.
To solve the issue of container shortages, shipping lines are reducing free time and detention period.
For example, some shipping lines have reduced their free time in Japan from 14 to 7 days.They established a system to quickly collect containers, unload cargo and return the containers.
Lack of Manpower and Chassis in North America
This is information I obtained from America. Currently, there is lack of manpower and chassis due to coronavirus.
In North America, they collect containers at port and take them inland. However, the containers do not return for a long time.
The cause of delay is due to manpower issues at the consignee.
Also, there is a shortage of drivers, which means they are unable to bring the containers back quickly.
Therefore, there is a lack of chassis to collect containers from the port. Because of these reasons, more containers are stopped at the port.
It normally takes 1-2 days to return empty containers and chassis, however currently they may not return for over a week.
These problems are repeatedly happening allowing the situation to worsen.
In one example, the reason of the delay was explained as a lack of drivers and chassis. This led to them collecting the containers 2 weeks after arrival of the ship.
Increase Ocean Freight dramatically
Sea shipment costs for North America have increased dramatically.
Normal ocean freight to Los Angels port, which is referred as “entrance of Asia” normally costs no more than $2,000 for a 40ft container.
However, some shipping lines have increased the charge to nearly $4,000.
I have explained this topic in another video, but shipping lines are engaged in a price war.
In 2016, this resulted in a major Korean shipping line filing for bankruptcy.As there is a lack of containers, it is understandable that they increased the ocean freight.
When it will be solved?
According to media reports, this problem will be solved in February or March next year. However, I am not sure exactly when it will end.
Depending of the impact of coronavirus, it may slow down cargo handling even more. This is the first time we have encountered the impact of container transportation under such a pandemic.
Therefore, it is very difficult to make a forecast.
Summary of today’s topic. The cause of a lack of containers is coronavirus.
・ Reduced economic activities from April to June in the world.
・ From July, demand of day to day goods has recovered which increased export.
・ China was able to manage coronavirus and recovered their production earlier than other countries. It increased exports from China.
・ Shipping lines reduced the number of their vessels. Empty container transportation is reduced.
・ Due to Christmas business demands in North America, China is using containers for North America.
・ Due to a serious lack of drivers and chassis in North America, containers are not being returned from inland.
・ Containers cannot be unloaded.
・ Due to a lack of manpower in North America, cargo handling speed has reduced.
Each factor has made the situation worse and has led to a serious lack of containers.
This problem will not recover until February or March 2021, but I cannot see the end of the tunnel due to coronavirus.
Currently, due to a lack of containers, we are unable to book containers with last minute bookings.
If you are required to make cargo bookings, please inform us as early as possible.