Containerships speckled across the sea, as far as the eye can see, is the dramatic vision off the U.S. coast at Los Angeles. Congestion is out of control in the U.S. and that’s why there are problems in Australia.
One set of footage has been provided by the U.S. Coast Guard. You can see it here for yourself. The U.S. Coast Guard footage has been verified by numerous U.S. based media outlets.
The fact of massive congestion off the coast at Las Angeles has also been confirmed by independent aviators who have flown their own flights across the congested sea. You can see an example of that independent footage here for yourself too.
Shipping Australia has repeatedly reported on congestion and the effect in Australia.
Loop-the-loop
It should be remembered that ocean shipping is a global industry. Ships sail in a loop – they call first at various other countries, then at seaports in Australia, and they then call at those other countries again.
Delays in one country throw vessels off-schedule right around the loop. So what happens on the other side of the ocean may have profound effects here in Australia.
And massive congestion throwing vessels off-schedule is exactly what’s happening just off the U.S. coast at the Port of Los Angeles and the adjacent Port of Long Beach.
Explanatory
For a full explanation, read this Explainer. It, well, explains everything.
Nobody’s fault
None of this congestion is a problem of the shipping industry’s making. None of this is a fault of the shipping industry, or, indeed, anyone else.
There’s a pandemic. In addition to the terrible public health catastrophe and economic disaster, it has had a variety of other effects.
One of these is, bizarrely, logistics congestion. Because people who can’t go on holiday, can’t go and meet their family, can’t socialise with friends, can’t do their leisure activities, can’t go to work, can’t go anywhere or do anything, have apparently turned to internet shopping and retail therapy in droves.
There is just an awful lot of demand. That demand has accelerated at the literal tap on a screen, at the touch of a button, or the click of a mouse.
Never-before seen inventory levels
“We have never, in the 28 years of data, seen the relative inventory level for [U.S.] retailers be as low as they are now”, write analysts at Sea-Intelligence.
And that, in turn, means an unprecedented demand for container shipping services.
Faced with such one-off and overwhelming demand, supply of containerised goods carriage in the form of hard infrastructure – containers, ships, berths, container terminals, ports, empty container parks – simply hasn’t a hope of keeping up.
There is extensive congestion, despite what various parties may assert. But there is no grand conspiracy. No one is out to rip-off anyone else.
And that’s the truth. Just look at the videos again. You can see it for yourself.
Incredible resilience and value for money
All of this crazy congestion exposes the falsehood that supply chains are somehow fragile. The evidence is very much that supply chains, particularly the maritime supply chain is very robust.
Remember: 99.92% of all goods and commodities that leave or enter Australia do so by sea.
Yet, despite the pandemic, despite the massive congestion around the world (New Zealand is congested too right now), despite the ongoing problems caused by officials and their overly restrictive rules on the maritime sector, goods are still available in the shops.
Australian families can still buy clothes, food, furniture, garden equipment, cars, household goods and all the many other varied goods that they want to buy. Exporters can still export to their vital overseas markets.
Shipping is, and has been for a long time, incredibly good value for money. The cost of transporting a small electronic appliance from Asia to the US is about US1.50, a kilo of coffee is US$0.15 and a can of beer is a penny, according to the World Shipping Council.
Backlog will, eventually, fall away
Ultimately, all of this backlog will fall away. There are a few likely ways out of the woes. In his estimable book*, “Maritime Economics“, Dr Martin Stopford discusses the shipping cycle and markets.
He points out that, in a situations of extremely high demand, shipping investors of various kinds will inevitably bid up the price of existing tonnage and, when that gets too expensive, induce the building of new ships. That takes time to work through though. Years, most likely.
In the near-term, Sea-Intelligence sees strong demand in 2021 through to early 2022. The analysts in the quote below discuss retail inventories, which is a vital factor in the demand for container shipping.
“If retail sales in the US revert back to the normal trend growth in 2021 – i.e. they do not “collapse”, they simply go back to normal – then we will see import growth for the entirety of 2021 remain elevated compared to 2019, simply in order to rebuild inventories. By early 2022, we might then see year-on-year growth temporarily approach zero, but this is a short-term phenomenon, associated with the excess inventory build-up seen in 2021. Overall, what this means is that a normal development in sales in the US, could – through inventory replenishment – sustain a strong US import container growth through all of 2021”, the analysts write.
It can, perhaps, be hoped that the ongoing roll-out of various COVID vaccines might do what everyone hopes and help humanity fend off the SARS-CoV-2 pathogen.
Hopefully, then, governments around the world can be persuaded to relax restrictions, everyone can go out for dinner and demand will fall back from the peak.
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*Shipping Australia doesn’t get any commission, fee or other payment for this recommendation. We just really like the book.