The COVID-19 pandemic had an unprecedented impact on global economies. Lockdown measures worldwide meant that manufacturing was halted, ports were closed, and shipping companies were forced to make dramatic adjustments to their regular schedules.
Despite the unpredictable disruptions to supply chains at the beginning of the year, the final quarter of 2020 saw massive surges in demand as shipping companies recovered in time to facilitate seasonal demand in North America. While the volume of world merchandise trade reduced by 5.3% in 2020, it is expected to increase by around 8% in 2021.
Although global demand is increasing, these statistics don’t tell the full story. Global trade has rebounded from the pandemic’s impact in some ways. However, the World Trade Organization (WTO) used year-on-year statistics to predict an uneven global recovery concerning specific industries and geographic locations. From the current container shortage to the volatile freight rates, global container shipping lines had to be flexible in their rebounding efforts.
The Global Container Crisis
One of the most significant problems for the largest container shipping companies is the global container crisis. Due to slower processes, abandoned trade routes, port congestion, and increased demand due to the pandemic, there are no longer enough shipping containers to meet current shipping demands.
Blank sailings throughout the pandemic and a buildup of shipping containers mean the shortage continues through 2021. To help meet demand, many shippers are sending vessels back to their points of origin empty. Many of the world’s largest shipping companies, such as Maersk, MSC, and CMA CGM, have to adjust strategies in real-time to adapt to the changing circumstances.
Hapag-Lloyd made efforts to speed up container emptying and refilling time by 25% to maximize container use. This is one of several alternative strategies adopted by the liner to deal with the crisis.
Although economies are already recovering, the container shortage is predicted to last into 2022. However, the disruptive bottlenecks are beginning to ease, which should alleviate some container capacity shortage issues.
Easing of Global Restrictions
As the pandemic took effect on a global scale, trade lines had to remain open to the transportation of essential goods. Although lockdowns and restrictions slowed things down, consistent eCommerce growth meant that demand for international distribution remained high. From September to December, demand skyrocketed in regions that celebrate Christmas, creating a huge scramble for imports to these marketplaces.
Although this demand spike favored shipping lines, the recovery imbalance is still apparent. The United States went from having a record-low unemployment rate of 3.7% to its highest since 1947, 14.8%. Mexico, a country with one of the largest gross domestic products (GDP) in Latin America, was predicted to grow at a 1.8% rate throughout 2020, only to reduce by more than 8% instead.
With such a dip in the global economy, it’s still unclear what the lasting impacts will be for all industries, including shipping.
Efforts to Clear Port Congestion
Port congestion has been one of the most troublesome logistics issues throughout the COVID-19 pandemic. Not only does it cause a backlog at the point of destination, but it can have severe knock-on effects. Even minor congestion can disrupt on-land distribution schedules, lead to missed connections, and increase operational costs for shippers.
While efforts are being made on all sides to ease port congestion, it looks set to continue throughout 2021. As vaccine distribution takes priority over other shipments, it manages to bypass the current congestion.
U.S. ports are working at full capacity to empty and refill ships while adhering to COVID-19 protocols and making way for vaccine shipments. Manufacturers in Asia are operating 24/7 to help meet worldwide demand. Despite the dedicated efforts, more time is needed to ease problematic port congestion.
Volatile Freight Rates
A byproduct of the pandemic that’s helping shipping lines with recovery is the increase in freight rates. Shipping companies have prioritized more profitable customers and trade routes, allowing them to survive while operating at reduced capacity.
According to the United Nations Conference on Trade and Development (UNCTAD), the greatest increase in freight rates has been on trade routes between developing countries, where businesses struggle to afford the additional costs. At the beginning of 2021, freight rates between China and South America increased by 443%.
What’s on the Horizon?
In general, it seems that shipping lines have rebounded successfully from the most challenging aspects of the 2020 pandemic. However, recovery is ongoing, and various sectors within the industry continue to operate under severe pressure. With the container shortage set to last into 2022, international logistics may prove to be a strain on many businesses.
In such unprecedented circumstances, it’s now more important than ever to work alongside a leading international shipping company. If you need advice, guidance, or services regarding overseas distribution, contact Asiana USA. We are dedicated to ensuring the timely delivery of international freight.