The global shipping market is getting worse rather than better

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Logistics

The global logistics market has gone through a horrible winter.

The pandemic caused massive disruption. US and European ports became gummed up with PPE and medical equipment. This resulted in port delays and tens of thousands of containers being out of position at destination when they are needed at origin, further exacerbating a lack of space.

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Shipping market challenges

Shipping

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Shipping lines that had cut back in the pandemic have been caught on the hop. As such, they have been unable to catch up with the unprecedented surge in demand for shipping space as global supply chains have rushed to restock.

Any consumer who imports or relies on domestic suppliers who in turn import — or rely on imported components — will have been hit with delays and cost overruns.

Back in the early part of this year, many observers, us included, expected the market would improve. Indeed, freight rates – a barometer of demand – had started to come down early last month. That encouraged some to believe the worse was past.

Meanwhile, India has been going through a well-documented second wave of COVID infections and now China is facing disruption due to infections. India appears, from an infection rate, to be getting on top of its recent wave. However, with vaccination rates so low, the country is already preparing for a third wave.

Shipping rates and delays have increased since the start of Q2. There are delays of up to two weeks to get space on vessels.

China shipping market

In China, shipping rates had eased from $10,000 per 20-foot box in Q1 to $5,000 per 20-f00t box on the European route in the spring. However, the rate is back up to $7,500 now. Furthermore, that is before news last week that a major port near Shenzen in top exporting province Guangdong has temporarily halted operations due to a COVID outbreak.

Berth congestion and cargo delays at Yantian International Container Terminal (YICT) have resulted in vessel diverting planned stops at the port. In addition, it has caused widespread traffic delays in and around the port. In turn, there is even greater pressure falling on nearby ports trying to cope with the fallout.

The resulting congestion is adding to an already overheated container market. Few in the industry see much chance of the tight global market easing before 2022.

Importers should expect rates to remain high and delays the new normal for the foreseeable future on both the Asia to West Coast and Asia to European routes.

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