As the backbone of global trade, the current shipping container crisis raises multiple red flags for importers, exporters, consumers, and the container industry.
Despite the container shortage beginning in early 2020, we are still struggling to see the light of day shortly after the pandemic. Ports are still congested, the flow of goods is unpredictable, and prices continue to inflate. Much like our feelings towards the pandemic, we are left questioning whether this is the new normal?
While the global shipping container shortage resulted partly because of international trade disruptions as an offset of the pandemic, it is now returning the favour. Specifically, the issue has now come full circle, where the shortage is now having significant impacts on global trade.
Global trade is extremely important for multiple reasons, making the container crisis a great concern. Not only does it allow countries to expand their markets and access goods and services that are unavailable domestically, but it helps maintain economic stability.
So, how has global trade been affected, what’s being done to solve the shortage crisis, and what does the trade future look like?
Container Shortage Summary
The term ‘shortage’ has provided a somewhat misleading understanding of the issue at hand, as none of the containers have physically been destroyed. Instead, it is an issue of accessibility.
In response to the pandemic, the demand for goods throughout 2020 and 2021 can only be described as a rollercoaster. One minute, demand was at an all-time low, and then people couldn’t get enough of online shopping the next. Understandably the container industry was not prepared for such a commotion, and their lack of immediate response to the issue has had lasting effects.
Despite the industry not acting quick enough, they cannot take all the blame for the state of the crisis. Shipping container ports and the industry as a whole do have protocols for when things begin to go south in an attempt to resolve the issue quickly. However, this predicament is unique because it came on so fast and affected nearly every aspect of the industry all at once.
Primary causes of the shortage:
The pandemic truly has affected every aspect of life, including employment within the container industry. Specifically, many ports dealt with workforce shortages during the pandemic where not enough personnel were available to meet the constantly changing demands.
As a result, sailings were missed, vessels were delayed, and container loading volumes were limited. Consequently, the general shipping cycle was altered, and containers began to build up in ports, unable to be used in other places where they were actually in demand.
The altered flow of goods
The industry was also indirectly affected by the pandemic through its effect on consumers purchasing behaviours.
The unpredictable environment as COVID-19 ran around the globe caused consumers to act the same way in response. The resulting irregularities in purchases and demand have greatly affected the flow of shipping containers and contributed to the shortage.
Reduced availability of containers
Throughout the beginning of the pandemic in 2020, consumer demand drastically decreased, and simultaneously the national lockdowns in China caused a massive shutdown of manufacturing and trade in that region.
As a result, the normal flow of shipping containers was significantly disrupted, so when regular demand returned, the containers were not in the correct places to be accessed and used, hence, why it is being deemed a shortage.
Ultimately, these factors all contributed to the shortage of shipping containers and have had subsequent effects on supply chains, disrupting trade on a global scale.
About a quarter of all global production is exported in the current market, with 90% of these goods being transported by shipping containers across the sea. Understandably, it can be said that the shipping container industry is at the essence of global trade.
Containers, the primary way to move goods internationally, evidently significantly impact international suppliers, manufacturers, and consumers when issues arise. So, as a result of the crisis, every issue that has caused the shortage in the first place has subsequent effects on global trade.
International trade is of core economic, social and global importance. Its purpose is to enhance the ability to access certain goods and services but has subsequently created a more competitive market. As a result, pricing has become more competitive, making exported goods typically cheaper for consumers.
While the market is likely to remain competitive, the demand for containers has also become more competitive during this shortage. As a result, the limited access to containers combined with high demand has driven up both the price of shipping and the cost of sourcing new containers.
Manufacturers are aware that container demand is high and are taking advantage of this by charging premium prices. Chinese container manufacturers dominate the market and are now charging around an extreme $2 500 per new container, nearly $1000 more than last year's average.
Despite a struggling industry, it seems that stakeholders are continuing to act with capitalist incentives, leaving the issue to dwindle in the background. However, almost every industry faces problems caused by damaged supply chains and container shortages.
Massive electronic conglomerates in East Asia have been severely impacted by supply chain disruption, as essential electronic components and materials are being delayed or are simply unavailable to be transported.
Automobile and smartphone manufacturers, which also have large global markets, are also major industry segments impacted by ‘microchip shortages’ due to the constant disruptions. This affects consumer access and companies’ ability to make and produce products, causing further unprecedented economic issues.
Industry professionals and stakeholders are extremely uncertain about the shipping container shortage crisis’s future and how and when things will return to normal. So instead, many of these stakeholders have established different approaches to address the issue and ideally resolve the problems with global trade.
As a brand of the Alibaba Group, Cainiao launched a container booking solution for sea and air freight. Designed to cover over 200 ports across 50 nations, this was an attempt to address the backlog of empty containers by creating a new internal shipping cycle.
As the world's largest shipping container line, Maersk suffered the most significant impacts from the container shortage. However, despite seeing any potential change, they anticipate normalised buying patterns and increased production of containers to relieve port congestion and return the industry to its prior state. Ultimately, considering the issue an everyday hassle, but a temporary one nonetheless.
The general consensus is that there is clearly an issue at hand. The shipping container shortage is happening and is extremely complex to solve. While there is no straightforward roadmap out of the scenario, and many industries have been left in uncertain waters, there is hope that drastic improvements in both the container and global trade industry will be made as the pandemic subdues.
If these issues continue longer than anticipated, companies may adapt, much like they have to other problems caused by COVID-19, and find new ways to source these international goods. Whether by finding new ways to transport these products or by producing them locally, it is bound to impact the trade market and economic stability significantly.
The pandemic has thrown many hurdles, making life somewhat unpredictable and increasingly daunting to make big financial decisions. If you are interested in owning or renting your own shipping container but are confused about the current container economy, contact the team at Tiger Containers today.
We understand the hesitancy, and as industry professionals, we have done the research for you to offer the highest quality, specialist advice to help you make the right purchase decision.