It’s been nearly a month since the Ever Given, the 1,300ft cargo ship, was freed from blocking the Suez Canal. However, the ripple effects are still being felt in supply chains around the world. Sadly, the problem is probably not going away soon…
Record Delays Despite Record Prices
Even before the Ever Given got stuck, shipping container shortages were at record highs. The shortage of containers is due to record consumer demand combined with reduced port operational capacity during the pandemic. Thus, when the Suez Canal was blocked, the already disrupted sea shipping industry was thrown further off course.
With shipping containers scarce, freight costs have soared. Some 40ft containers are being sold to the highest bidder for as much as 7x the normal cost. With a supply of shipping containers so low, some factories in China are considering temporarily halting operations until mid-May when (hopefully) it’s easier to secure containers. Ge Lei, who owns one of China’s largest bicycle factories said, “I think it’s less to do with price because even if I am willing to pay more, there is still no container.”
Prices have gone up despite much slower delivery due to port congestion all over the globe. According to recent surveys of global manufacturers conducted by IHS Markit, the “stretching of supply chains” over the last year has extended delivery times to levels “unsurpassed in over 20 years of data availability.” Shipping which normally would take about 30 days is now taking closer to 90 days in some cases.
When Will Shipping Return to Normal?
The problem may actually get worse before it gets better. The National Retail Federation expects import volumes to the US from Asia to be 14% higher this spring than in 2019 and to stay elevated before climbing again this summer.
Many shipping companies have prioritized sending empty cargo containers back to Asia over making their scheduled port calls. With so many ships deviating from their normal sailing routes, the intricately connected shipping network is becoming even more disorganized.
With sea shipping unreliable, air cargo costs have also gone up. Freightos marketplace data shows Asia-US airfreight rates doubling to most destinations. Rising fuel costs are putting additional pressure on prices. High volumes combined with still-limited capacity from passenger jets and fuel prices is likely to keep rates elevated for some time.
As a global supply chain company, Blacksmith International has seen the effects of these shipping delays firsthand. Our team in China has been able to pull strings for many of our clients, placing them first in line for a container. For faster delivery, we are still advising that our clients use air freight.
Blacksmith will continue to update our clients on sea shipping delays and do everything we can to ensure on-time delivery. If you have any questions, please contact us.