COVID-19 has infected over 100 million people to date. Unfortunately, 2 million souls have already been lost. The modern world is interconnected at a level unlike anything seen in history. For that reason, the global pandemic has impacted all industries and markets in an unprecedented way. Taking a look at the global supply chain reveals a myriad of gaps, problems, downfalls, and challenges that COVID-19 has delivered. Can the global supply chain restore itself? Will things ever go back to normal? The new trend suggests that there is a new normal that will emerge from this crisis. Things will never go back to the way they were and here’s why.
COVID-19 Related Disruptions In Worldwide Shipping
WHO Policies of Containment and Suppression
Slowing down the spread of the virus is of great concern to governmental bodies around the world. For this reason, the World Health Organization has set certain containment and suppression measures in play to slow down the spread of the virus. With the goal of flattening the curve, the WHO has put in place policies that have closed ports and completely shut down manufacturers and shippers across the globe.
This restriction and other confinement measures have seriously dampened commercial activity. Consequently, the global supply chain isn’t firing on all cylinders. Many shipping agents, ports, and buyers have been simply left to wait it out. With the demand for shipping containers at an all-time high, many firms refuse to sell their used containers. Instead, they prefer to refurbish them to keep goods flowing through the supply chain.
Increase Demand For Shipping Containers
Everyone wants to get their hands on a few 20’ and 40’ shipping containers. The demand for shipping containers in Asia is so high, that they simply can’t be produced fast enough. Many manufacturers of shipping containers also rely on commodities that would usually be shipped by container. So without raw materials, it is hard to manufacture the number of containers needed by the global supply chain.
With such a high demand for 40’ and 20’ shipping containers, some of the world’s products aren’t being shipped fast enough. Many of your local supermarkets and wholesale distribution facilities are simply out of stock on common goods. Items that usually arrived in ports by the ton are now seeing a sharp decline in availability. Therefore, industry players are gathering as many shipping containers as they can to send back to Asia. However, some industry analysts suggest that used containers won’t be in ample supply until 2023.
Congestion At Ports & Lack of Drivers
COVID-19 has left a wake of devastation throughout every division of the shipping industry. With so many shipping containers congesting the ports, there is just nowhere for them to go. International restrictions and travel bans still prevent containers from being sent back to where they are needed most. To compound that problem further, a shortage of drivers creates extra issues for the supply chain.
The Supply Chain Cracks As Consumer Spending Surges
COVID-19 has created a unique situation where the supply chain is experiencing huge inefficiencies at the same time as consumer demand surges. Now, more than ever, consumers want things instantly. They want stable markets and a surplus of goods. Even before COVID, trade tensions were tough between the US and China. COVID-19 just made things even harder. Subsequently, global trade came to a halt. By the summer of 2020, global trade was racing back to normal; however, those cracks in the supply chain came in the form of container shortages, logistic challenges, and surging shipping rates.
All The COVID-19 Related Disruptions Have Caused The Current Shipping Container Deficit and Much More
Disruption and mayhem would be an understatement. The current crisis could be better described as mayhem on top of mayhem. Ever since COVID-19 restrictions have slightly lifted, consumers have bought anything and everything they can get their hands on. In September of 2021, a record number of 73 container ships waited with anchors dropped outside the Long Beach and Los Angeles ports. The sudden rise in consumer spending, and retailer fears of future lockdowns have cranked the demand for goods into overdrive. As a result, the current infrastructure has been extremely overwhelmed.
Truck Driver Shortage
Analysts agree that there was a shortage of truck drivers even before COVID-19 hit the world. COVID-19 further compounded the problem by changing the way the industry operates. Combined with other global supply chain issues, the truck driver shortage has grown to over 61 thousand. Companies like Amazon Flex and other delivery services are attracting drivers with jobs around local delivery. Previously, goods were transported across the country to distribution facilities by large 18-wheeler fleets. COVID-19 forced the market to focus on home delivery. This new surge and demand for home delivery opened the door for drivers to earn comparable wages by driving shorter distances.
Shipping Container Deficit
We discussed a few COVID-19-related disruptions above and here’s why they have led to the shipping container deficit. So, you might be asking yourself why is it so hard to buy used shipping containers right now? The better question to ask is where have the shipping containers gone? Most of the shipping container deficit is largely a problem in Asia, with some shortages across Europe. Inland depots, cargo ports, onboard vessels waiting outside ports, and on transpacific lines. That is where the majority of shipping containers are. Once the logistics and costs can be sufficiently managed, we can expect shipping containers to get back to where they are needed most. However, only time will tell. Experts believe the dust won’t settle until 2023.
Based on current trends in the shipping industry and shortages of 40’ and 20’ shipping containers, we can expect the global supply chain to be stuck in this North American bottleneck for some time. Asian exporters still haven’t retrieved their containers from North America and some ports aren’t operating at full speed. Currently, for every 100 containers that arrive in North America, only 40 get back to Asia. Until this problem is resolved, we will continue to see big cracks in the industry.