Much of the current state of the world shipping industry can be pinpointed to one key driver: COVID.
In a new policy brief, the UN Conference on Trade and Development has confirmed that there has been an increased import demand for manufactured consumer goods, “a large part of which is moved in shipping containers”. The UNCTAD also notes that the lessening of lockdown measures, varying recovery worldwide, consumer-demand supporting stimulus, inventory-building and frontloading have all contributed to the increase in containerized trade flows.
This surge is expected to last into 2021, the UNCTAD notes.
Fewer boxes and ships
Demand was “stronger than expected” the UNCTAD notes and it has led to a shift in the geography of the container trade.
Empty box repositioning has become an issue as boxes were left behind. There were also strains such as labour shortages, port congestion, blank sailings, capacity constraints in trucking an other inland systems, delays in undergoing necessary testing, and delays by factories in returning containers.
Further complications have included port-related delays as ships wait for berths to become free. The global empty box situation was further exacerbated by the recent incident in the Suez Canal.
These factors have also led to a surge in freight rates across the globe, although the surge has been uneven in different parts of the world. That lumpiness is created by the different lengths of trade routes with some routes, such as China-West Africa, requiring a bigger number of ships to carry out a weekly service. UNCTAD also noted that a lack of return cargo makes it costly for carrier to return empty boxes to China on long routes.
Freight rate volatility has also been seen on “thinner” routes i.e. those routes that have fewer services can experience greater volatility if one service is amended.
Taken by surprise
The UNCTAD notes that “carriers, ports and shippers were all taken by surprise by the pandemic, and the subsequent shortage of empty containers observed since late 2020 is unprecedented”. It goes on to add that the “recent shortage in containers and maritime equipment took stakeholders by surprise”.
Looking forward
The UNCTAD foresees turbulence for the near-term future. “Given current trends, several months will likely pass before this disruption can be absorbed across the maritime supply chain and before the system resumes smoother operations”.
Future considerations
The UNCTAD looked at the issue of competition. Noting that that the shippers have raised the issue of access to empty containers, blank sailings and freight rates, and that it is important for policymakers to ensure that competition authorities can provide regulatory oversight in the area of maritime transport, the UNCTAD also states that there “are several reasons that may explain the shortage in containers and ship supply capacity, including the disruptive nature of the pandemic and associated restrictions”.
UNCTAD notes that trade facilitation measures will contribute to achieving the objective of facilitating trade and transport while protecting populations from the COVID virus. A key factor will be digitalisation of trade procedures, including in maritime transport. The UNCTAD has embarked on fast-track technical assistance project aimed at supporting trade and transport connectivity.
“Policymakers need to proactively engage in implementing ambitious trade and transport facilitation reforms to reduce the impact of disruptions in the future,” the UNCTAD reports.
Wrapping up this article, the UNCTAD also briefly looked at tracking and tracing. Monitoring of port calls and liner schedules, along with better tracing and port calls and liner schedules, are among the issues covered by the growing field of maritime informatics.
