Shipping Crisis: Why is it Getting Worse?
As the world slowly reopens, we’re all looking forward to going outside without any social restrictions or masks. We’re looking forward to traveling, going back to school, or working. For some of us, the nature of our jobs made it impossible to be employed during the pandemic.
The logistics and air industries almost collapsed during this time. The same goes for some service industries like restaurants and tourism. For this reason, a lot of people desperately want the pandemic to end.
However, the unfortunate news is that even if the WHO announces that the pandemic’s over tomorrow, we’re still going to experience quite a lot of hurdles before we go back to our “normal” lives.
The reason behind this is that the economic situation of the world post-COVID isn’t going to be fine. Now, this isn’t some big revelation, I’ll admit. After all, we all knew this would happen. But do we know how bad it really is?
I don’t think so.
While most of us expect some sort of economic crisis, we hope it will be resolved within a couple of years. After all, the world was literally closed for a few weeks. It makes sense if things are off to a bumpy start.
But I don’t think any of us understand the magnitude of what’s to come. Especially since most of us didn’t even know about the shipping crisis that’s happening at the moment.
What’s the Shipping Crisis?
Unless you’re an engineering student busy with their senior project (read: yours truly), you probably heard about the shipping crisis during the first lockdown. Here’s what happened.
When travel restrictions first began, most countries weren’t accepting goods from others in fear that COVID-19 would spread. So, what happened was that most shipments got stuck in ports. Billions of dollars worth of goods just wasted away at ports because countries weren’t giving clearance to do anything.
You couldn’t take your ship back, and you couldn’t remove goods from it either.
And since this happened for several weeks, ships full of containers of unused goods piled up in several countries, creating congestion. So, when countries first started to recover from COVID, China being the first, they couldn’t resume trade because everyone lifted restrictions on their own time.
So, for example, if China wanted its ships back, it couldn’t do anything about it because a country like the United States, which lifted restrictions much later, wouldn’t give China’s ships the clearance to leave their ports. Naturally, this created a shortage of both ships and containers as well.
Well, turns out there’s only a finite number of containers in the world. Growing up in a city with a major port, I always assumed that there were plenty of containers available. After all, many old containers are just lying around in dumps in Karachi. But I recently visited the port, and even the Bin Qasim Port had no containers lying about. That’s a shocker but compared to major ports like Los Angeles and Shanghai, the Karachi Port is a mere speck.
And our port’s congested. I can only imagine how others are.
But it keeps getting worse.
The Container Shortage Just Piled On To The Shipping Problem
So, because there’s a shortage of containers, even vessels that are free and can move about don’t have enough cargo. They’re not operating at full capacity, causing many shipments to be canceled or postponed. After all, why would you expect any corporation to work at, say, 10% capacity?
This naturally created a more significant strain on the industry, meaning that there were shipment delays, leading to a higher demand for quicker services…services which just couldn’t be delivered. As you can imagine, this has led to an increase in freight prices, leading to the rise in the price of most goods.
It’s one of the reasons behind the recent global rise in prices. In December last year, it looked as though the shipping crisis would get better. After all, when it first happened, everyone was always talking about it.
While researching on the topic, I realized that there’s not enough information anymore. Many suppliers have just accepted freight issues as the new norm. But for how long?
Sure, governments around the world are doing their best to deal with this situation. The Governor of California recently came up with a new plan to deal with the port congestion in Los Angeles
However, there hasn’t been any tangible improvement in the situation. In fact, it’s actually gotten worse. There’s been a massive carryover of goods that were scheduled to be delivered in 2021 and shippers are worried that they won’t be able to deliver anything on time.
How Has This Affected Things?
What’s even more interesting is that we’re seeing an increase in import numbers. So, there are many countries importing products when they never had to do so before. Similarly, we’re seeing countries like Venezuela, Vietnam and others missing out on major trade deals because things can’t be delivered on time.
While richer countries like the US, Canada and others can afford to handle the delays, many, many poorer countries can’t. Not everyone has a large inventory or stockpile of everyday goods. This has the potential to become very problematic, especially if the pandemic doesn’t end soon.
However, as you know, there’s been a rise in cases across the globe and even though governments are insistent on reopening, it begs the question: what’s going to happen next?