No Quick Fix for Shipping Crisis Creating Supply Chain Bottlenecks | Voice of America

WASHINGTON – A significant increase in demand for consumer goods in the United States and Europe, combined with the disruption caused by the coronavirus pandemic, has shaken global shipping markets, pushing up the cost of transporting freight containers to United States and around the world.

This has resulted in higher prices and huge delays at ports and logistics centers, severely damaging supply chains around the world.

FILE – People are seen at a McDonald’s in London, July 22, 2020.

In some cases, backups have noticeable effects on everyday life. This week, supply shortages in Britain prompted McDonald’s restaurants to remove milkshakes and some bottled beverages from their menus and forced chicken restaurant chain Nando’s to temporarily close 50 stores.

In the United States, it is now common to see dozens of huge container ships waiting outside major California ports due to safeguards, while inland logistics centers are overflowing with containers that have yet to be loaded onto ships. trucks to be shipped to their final destinations.

Rotterdam, the largest port in Europe, had to contend with congestion issues this summer, as have UK ports.

A report released this week by financial services giant Citigroup and the Economist Intelligence Unit suggests the problems have deep roots and are unlikely to go away anytime soon.

“Changes in supply chains were already underway, due to geopolitical and economic factors, and COVID-19 has accelerated some of them,” the report revealed. “The recent virus outbreaks – driven by the delta variant – mean that we have yet to see the last of the supply chain disruptions, as economic activity in Asia-Pacific continues to be hampered.”

Complex set of problems

The current logistics crisis is not just based on increased consumer demand, but it is certainly a factor. At the onset of the pandemic, the use of container shipping temporarily declined, with businesses unsure of how consumers would react to long bottlenecks and whether it would be safe for their staff to travel.

But that quickly changed when consumers, forced to restrict their spending on things like vacations and dining out, began purchasing home office equipment and other goods to make lockdowns more bearable.

“By mid-2020, it was pretty clear demand was going to be strong,” McKinsey & Company partner Steve Saxon said in a video posted to the company’s website. “All of those container ships were sailing again.”

It was only a few months before the industry was operating at full capacity, with 97-98% of container ships sailing at some point.

Capacity limits emerge

But in the United States and Great Britain, in particular, capacity limits have started to appear. A shortage of truck drivers in both countries has created bottlenecks at inland ports and rail hubs, forcing some warehouses to refuse delivery of new containers until backlogs can be reduced.

This led to other problems. Because containers took longer to unload, they were not always available for reshipping – full or empty – to ports in Asia that export to much of the world. Shipping companies such as Maersk have sent notices to trucking and logistics companies arguing for the return of containers and announcing expanded schedules at facilities that can prepare them for a return trip.

At the same time, various ports in the United States and China have had to temporarily close or reduce their services due to COVID-19 outbreaks among the personnel responsible for loading and unloading sea containers. This month, the Chinese government closed a terminal at the port of Ningbo-Zhoushan, the country’s second largest, for two weeks due to an outbreak of COVID-19.

FILE – A view of the container ship Ever Given, chartered and operated by container shipping and transport company Evergreen Marine, at the Port of Felixstowe in Suffolk, England on August 3, 2021.

Another event that caused a series of cascading delays was the accidental grounding of the container ship Never given in the Suez Canal, which blocked navigation on the main thoroughfare for six days in March.

Extreme price increases

One of the results of these multiple crises has been the extraordinary increase in shipping costs.

Just a year ago, according to data compiled by Xeneta, a company that tracks shipping rates, it would have cost less than $ 2,000 to ship a typical 40-foot container from the Far East to the North Europe. As of this week, the current average price has climbed to $ 13,607. Likewise, the price of transporting the same container from the Far East to a Mediterranean port has dropped from $ 1,913 to $ 12,715.

FILE – In this July 24, 2019 photo, workers watch a truck drive past stacks of shipping containers at a port in Yingkou, northeast China’s Liaoning Province.

Rates have skyrocketed for almost all major trade routes. According to Xeneta, the average cost of shipping a container from China to the west coast of the United States has fallen from $ 3,350 last year to $ 7,574 this week. Shipments from the Far East to the east coast of South America have fallen from $ 1,794 last year to $ 11,594 this week.

It is important to note that these prices are only averages, and they are distorted by large importers who are able to negotiate discounts with shipping companies. Small importers looking to move a handful of containers can pay a lot more.

Companies in difficulty

“The disruption of the supply chain is catastrophic across all categories of consumers,” said the Toy Association, a trade group for companies that manufacture and sell entertainment products for young people, in a statement provided to VOA. “Toy companies are facing shipping price increases of 300-700% and a host of outrageous additional charges – if they can even get containers and space on ships.”

With the holiday season on the horizon, the group said retailers will face shortages and consumers should expect higher prices.

“Not only will buyers undoubtedly and unfairly see price increases, they may not even be able to find the products they are looking for in the weeks and months to come,” the group said.

No quick fix

Experts don’t expect much relief in the short term.

John Drake, vice president of supply chain policy at the United States Chamber of Commerce, told VOA his association “regularly hears from our members who face significant challenges in getting goods through. and the products to their customers on time ”.

He added: “A lot of these delays are linked to COVID – a shortage of truck drivers and storage space, a big shift in American consumers spending money on goods instead of travel and entertainment. , and ongoing COVID-related closures at ports and factories around the world. , among others. Unfortunately, we expect these delays to continue until 2022. ”

VOA Mandarin Service reporter Fang Bing contributed to this report.

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