It’s now been over one year into COVID-19 pandemic, some countries around the world continue to gradually ease restrictions which allows people to return to normal life. However, manufacturing overall is still suffering from the significant impact of the pandemic. In our June article, we talked about the rising cost of raw materials by analyzing key changes in both demand-side and supply-side economics.

In today’s blog, we will focus on another sign of supply bottlenecks – the skyrocketing shipping cost, driven by the global shortage of shipping containers which begins to blow up in mid-2020. The container shortage has not only led to higher inflation in container prices and shipping cost but also caused serious lead time delays.  

Container Prices Continue to Surge

Drewry’s composite World Container index increased 1% or $103 to $8,985.83 per 40ft container which remains 349% higher than a year ago, according to 22 July 2021 update. The measure has surged 64.2% since the first week of May. Listed prices to ship from China to major ports in Europe and the U.S. are between $11,000 and $13,000 per 40ft container. Drewry expects rates to increase further in the coming weeks but at a slower pace. Some companies say they are being charged $20,000 for last-minute agreements to get goods onto outbound vessels. 

Credit: Drewry Shipping Consultants Ltd

Container Vessel Schedule Reliability Falls to Record Lows

ž.According to Sea-Intelligence’s latest Global Liner Performance (GLP) report, the global schedule reliability in May 2021 reaches 38.8% which indicates that only 38.8% of container ships globally were on time arriving at ports when more than 70% of ships arrived on time for the same month in the past two years.

Credit: Sea-Intelligence
žž.According to CNBC, Shehrina Kamal, the Vice President at Everstream Analytics, reveals that waiting times for vessels to berth at the Yantian International Container Terminal in Shenzhen have “skyrocketed” from an average of 0.5 days to 16 days.
As a result, manufacturers and exporters are struggling to find enough containers for transporting their goods. Many companies have faced a lot of last-minute container booking cancellations as you can do nothing about it. With August just around the corner, it’s about time for brands and retailers to start preparing for the upcoming holiday season which could surely worsen the shipping problem in the future. As reported by CNBC, Home Depot, the world’s largest home improvement retailer, has decided to acquire its own container ship to avoid delays in the transportation of their goods. This definitely highlights the current tightness in transportation market and the problem seems to continue and tighten further this year.

When Will the Global Container Shortage End?

According to The Loadstar, John Fossey, senior analyst of container equipment at Drewry Shipping Consultants, says that the full-year 2021 container production could be more than 4.7m teu which would become a record year, beating the 4.42m teu produced in 2018 and 52% up on the 3.1 teu delivered last year. So the world actually has enough containers but they are just not in the right place due to global port congestions across the US, Europe and Asia. Shipping experts say that the container shortage is likely to last until 2022 and also the price of containers will keep rising as we can’t simply end the issue by making more containers.