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| Shipping Industry Challenges in 2021 |
Shocks to supply chains are engulfing a wider swath of the global economy as the pandemic rages on, threatening to stifle Asia’s trade-led recovery just as soaring freight rates make it harder for businesses to weather another year like 2020. Compounding the industrial imbalances are transport woes plaguing consumer and health-care sectors still dealing with a dearth of available shipping containers to move components and finished products out of China, Taiwan, South Korea and Asia’s other export powers. Nerijus Poskus, vice president for global ocean at San Francisco-based freight forwarder Flexport Inc. , reckons the world needs the equivalent of 500,000 more 20-foot containers — roughly enough to fill 25 of the largest ships in operation — to satisfy the current demand. In the meantime, standard container rates on transpacific routes are quadruple what they were a year ago.
«Anyone paying the freight bills in 2020 though knows the true cost of shipping is much higher than even the recently increased rates,» Poskus said. Now they’re threatening to act more like a brake on the global recovery.
Crimping Demand
Satellite tracking shows almost three dozen container ships are anchored waiting for berth space at the twin ports near L. After booking two containers to Europe for a shipment last month from Yantian, Shenzhen, he was later told he could only get one. «When we went to the container terminal to take the container they said ‘sorry, there’s no container anymore, they are all used up,’» said Yu, director of the Hong Kong-based company, which has manufacturing facilities in Guangdong. Containers that once would have cost $2,000 to send across the Pacific are now being quoted as high as $13,000 for service before Chinese New Year in mid-February, he said. While most shipping analysts see the congestion lasting through the first quarter, there may be longer-term economic costs — both for consumers to bear or companies’ margins as higher transport costs get baked into annual contracts with container carriers.
Supply Uncertainties
The outlook gets no less murky heading into February — when Chinese New Year marks a seasonal turn in Asian exports, many importers renegotiate freight rates with carriers for the next 12 months and the carriers themselves start to receive tens of thousands of new containers they ordered last year. Elevated container rates «may factor in for the rest of the year,» even if the current disruptions get ironed out, said Chris Rogers, lead trade analyst for S&P Global Market Intelligence’s Panjiva. There’s a lot riding on manufacturing to drive the global economic recovery given the doldrums that tourism and hospitality are mired in. The World Bank this month warned that the rebound from the deepest recession since World War II will be slightly weaker than previously expected.
The Washington-based lender also trimmed its global trade volume growth forecast to 5% in 2021 following a 9.5% contraction last year.
Source: Enda Curran and Brendan Murray | Bloomberg
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