Chris Morris, BBC Global Trade correspondent investigates how Covid disrupted shipping routes around the globe – and what that means for Christmas gifts this year.
A shipping container arrived seven weeks late at Leeds warehouse on a cloudy morning, just before Christmas.
It came from Ningbo China and contained toys as well as games.
Additional containers not expected prior to Christmas won’t arrive until January
Businesses are experiencing frustrating delays due to the Covid pandemic’s impact on supply chains all over the globe.
Even worse is the fact that global shipping costs have risen significantly this year.
It is good news for shipping companies – who are estimated to make record profits of $150bn (£113bn) this year, according to maritime consultancy Drewry. However, it can be a significant burden to many other businesses.
You’re out of your kilter
Boxer Gifts, a Leeds-based family business that designs and develops seasonal gifts and games is busiest during the year.
Nearly all of the stock they have is produced in China. This helps to keep prices low and makes container delivery very reliable. This year, however, it is not so.
Thomas O’Brien is Boxer Gifts’ managing Director. He says that “now 95%” of the recipients are more than a week late.
The container arrived today but was held up for three weeks before it reached China. Another month was needed to delay it at sea. Stock that seasonal businesses can’t purchase until the last minute.
Problem is, there aren’t enough empty containers to fulfill the global demand for goods.
They are stuck at ports far away from their destination, and there is no way to get them.
Supply chain problems have been caused by delays and shutdowns of covid equipment.
The retailers attempted to stock up early following a challenging year in 2020. The situation was made worse by the escalating demand and a lack of containers or ships at the right places at the right times.
There have been many ships waiting for unloading at California ports throughout the year. European ports also have been subject to immense pressure.
Shipping was very sensitive to sudden shocks. There was a huge backlog caused by The Evergiven (the ship that blocked Suez Canal in March for six days).
It’s Covid who has caused the most damage.
Michelle Wiese Bockmann (markets editor for Lloyd’s List) says that container lines work like trains. They have schedules and are supposed to make calls at set times.
“And that’s just NOT happening because they can’t.”
This means that shipping freight from Asia into Europe is now more expensive than ever, according to Ms Bockmann.
The longer-term rates have risen even further, with 12 month contracts locked in. A container once costing $4,000 to ship from Asia to Europe is now about $22,000
This is why shipping companies that transport containers will make record profits in the coming year.
Ms. Bockman said that the rates should have fallen off or reached a plateau by this time of year. But we aren’t seeing that. We’re still seeing rates climb slowly, but surely.
Trade is moving at a faster pace than ever before. Ports work longer hours, but more ships are available to meet the demand. But it won’t be easy.
Tim Morris, the chief executive officer of UK Major Ports Group stated that the company has moved almost 24/7 to work in large locations. He also added that more staff and more resources have been created. This was according to a hearing before a UK parliament committee.
“There is clearly a lot disruption in the world, which means that the predictability and regularity of vessel arrivals have basically vanished.”
It puts enormous pressure both on the ports and on land-based freight-forwarders. For example, three ships might suddenly appear when they need one.
The system has also been put under pressure by other issues such as Brexit and the lack of drivers for HGVs.
Vulnerabilities in supply
Although the industry believes that shipping delays will be temporary, they can continue well into 2022.
It’s perhaps not surprising that Covid-19 caused such a huge disruption in the global supply chain, exposing vulnerabilities. They have held up in some cases remarkably well considering the magnitude of the pandemic.
However, it has served as a reminder to how dependent all of us have become in getting our shipping containers around the world delivered on-time.
An alternative is to boost local production. Boxer Gifts, Leeds is starting to make jigsaw puzzles from local materials.
However, globalization will not slow down anytime soon. It is still an extremely connected world.
Omicron presents new challenges to supply chains that we have taken for granted.
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