Explained about the effect of container shortage in 2020 by Video
Hello, it’s Iino. The previous video “the cause of container shortages” was liked shared and viewed by many people.Thank you very much for your support.
This time, as a continued episode of the previous video, I would like to talk about the “effect” of container shortages.
I have attached a link of “the cause of container shortages” in the comment section. If you haven’t watched the previous video yet, please check it out.
Influence of Container Shortage
Now, what is happening due to container shortages? There are two main points. Let me explain.
• Increase of ocean freight
• Delay of vessels
Also, I would like to explain the current approach of a freight forwarder to manage these problems.
Skyrocketing of Ocean Freight
First of all, if you are working for manufacturing, trading or logistics industries in Asia or Southeast Asia, you have probably realized that ocean freight is increasing dramatically.
In my last video, I mentioned that ocean freight for USA has hit the highest on record.
Now it’s affecting ocean freight around Asia as well.
For example, ocean freight from Thailand to Japan was relatively low and there hadn’t been much movement.
However, it started to increase from November and it has increased by double or triple in December compared with the past.
Ocean freight from China especially has dramatically increased. For example, 40 foot container ocean freight from Shanghai to Singapore was USD200 before. However, it is now increased to USD1,000.
From Tianjin to Thailand, it cost USD400 before, but now it costs over USD2,000.
Demand and Supply of Containers
Why has ocean freight increased dramatically? In general, price moves based on the balance of demand and supply.
Currently, there are container shortages especially in Asia and Southeast Asia. Shipping lines are operating empty collection vessels, however, there is more demand than supply of containers.
So, where are the containers? Actually, many of the containers are prioritized to use for long haul shipment from China to North America and Europe.
Influence due to COVID-19
Now, let’s talk about COVID-19 to know the souse of freight increase.
In my previous video, I explained that the container shortages are mainly caused by the increase of daily use items due to COVID-19 and manpower shortage due to lockdown.
They are definitely affecting the container shortages.
In terms of the daily use items, there are not only demands of Christmas marketing in North America, but also demands of other goods to allow people to work from home and exercise goods.
Where are they made? Yes, they are made in China.
In Europe, they were preparing for the third wave of COVID-19 and there were extra shipments for daily necessities and consumables from China to increase their stock level in September.
Due to this high demand and shortage of containers, ocean freight from Shanghai to Rotterdam in Netherland in September to October has been increasing.
Manpower Shortage due to COVIDE-19
In terms of manpower shortages due to lockdown, UK and France entered second times national lockdown from November to December.
During the lockdown, they were unable to go out and they had a limited labor force at ports which reduced cargo handling speed.
UK ports started to see vessel congestion from this summer and it became worse after lockdown. It takes time containers handling and containers piled up at terminals.
To reduce congestion, some shipping lines stopped booking for the UK and tried to omit ports in UK.
As you can see, container shortages are caused by demands of daily necessities and lack of manpower due to COVID-19.
Delay of Vessels
On top of this, as shipping lines are trying to secure their profit, it is affecting container shortages in Asian countries.
They prioritize long haul shipment from China to North America and Europe where they can make more profit compared to shipment within Asia.
Therefore, there are no empty containers in Asia and Eastern Asia excluding China.
As there are limited containers available in this situation, it is a market principle for shipping lines to prioritize empty container collection for long haul where they can make more money.
It is not necessarily good or bad. I believe it’s the way it works under capitalism.
And they are affecting the delay of vessels as well.
As previously explained, there is lack of manpower at ports due to COVID-19. It is not because of lockdown in UK or France.
Cargo handling speeds in the port of Los Angeles in USA and the port of Colombo in Sri Lanka are also affected by COVID-19.
Congestion at Ports
Ports in Singapore where they act as Asian hub and handle high volumes of containers were struggling with serious congestion now.
Vessels are waiting by the harbor for more than 4 days and they are unable to unload cargo. The port of Singapore congestion is not from Covid-19. It is affected by the market change.
As explained, they are prioritizing containers for long haul shipment and they start to see no space on direct vessels for long haul shipment.
As an alternative, they use transship vessels which stop at Singapore. This transship cargo handling is the cause of congestion at port of Singapore.
For sea shipment, if one port is congested, it delays other vessel services including its sea routes.
Currently, there are heavy congestion in Asian ports including Singapore, Shanghai, Busan and Vietnam. I would like to remind the shippers and consignee.
What freight forwarder are coping
Lastly, I would like to mention how we freight forwarders are coping with this current situation. At the moment, there are no containers.
We deal business with many shipping lines in Thailand. Sometimes, we are able to ask them to get the containers for us or they will be able to prioritize us as we have a good relationship with them.
In this container shortage situation, shippers somehow need to ship cargo. So they contact their current freight forwarder and also they contact other freight forwarders to get the container for their shipment.
Therefore, sometimes there is double booking. And shippers will choose the best option based on speed and price. To avoid double booking, shipping lines will strengthen their collection of cancellation charges.
At the moment, ocean freight is at peak, but it’s not like you can ship cargo if you pay more money.
In addition to this, shipping lines have started not accepting bookings.
When will this end? Unfortunately, there is no clear answer yet. In Feb 2021, they might be able to receive ordered containers in China and there may be an increase of COVID-19 vaccines.
This may be able to improve the situation of container shortages. From my point of view, I will continue to collect information and create these easy to understand videos.
Let’s summarize today’s contents.
There are two main effects caused by container shortages.
Ocean freight has skyrocketed.
Until now, ocean freight from China to USA was increasing but ocean freight in Asian countries including Japan and Thailand has also started to increase.
Shipping Lines prioritize empty container collection for long haul shipment which allow them to make more profit. As a result, it increased more container shortages in Asian countries.
Shipping lines are concerned about double booking and have strengthened the collection of cancellation fees. Due to COVID-19 and market movement, ports are congested and causing delay of vessels.
There is no information of when this will end. And we are very confused with container shortages, ocean freight increase, vessel delays and bookings not being accepted.
I hope the situation will improve soon, and I will try my best to produce the latest information which is easy to understand.
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