Unquestionably, the pandemic has created an added challenge to international trade. The disruptions have increased costs and created uncertainty for global economic recovery. We have all heard the response “Well, because… COVID,” - but what does that really mean for the shipping and logistics sector? How has the pandemic added to the current challenges, what are the lessons learned?
One would assume China’s manufacturing recovery in late 2020 would usher in some normality for the shipping sector as a whole; however, the recovery has been uneven and restrained for some exporters and sectors.
Ports in North America and Europe dominate importance for shipping lines, siphoning container capacity, and with the pressures of quick turnaround, create shortages felt throughout the supply chain, more so in the smaller remote locales and on the fringes of those supply chains.
North American demand for Asian manufacturing is so intense that empty containers are often sent back to Asia for refill before domestic export.
The roots of the current congestion and container shortage trace back to the days of the 2008/2009 global crisis. The shipping industry was impacted and adjusted by consolidating and redirecting service routes to respond to major ports with higher demand, serviceability and profitability.
The current pandemic came suddenly, and with no economic warning. As markets bounced from the bottom, the dramatic reversal in ocean freight demand later in 2020 tested a system slow to adjust. In parallel with the demand for personal protective equipment and medical supplies, the consumer goods market skyrocketed as household spending shifted to online, and global shipping lines continued to place emphasis on servicing major ports – continuing a container shortage.
We accept that everything is a bit vague these days, well because...COVID, but what can we expect in the back half of 2021?
The structural pressures on container availability will in time adjust to better accommodate regional market demands, but this is expected to take time. Meanwhile, handling delays and increased freight rates will likely maintain - as cargo inspections and border controls increase and vigilant COVID related measures remain common place.
The advantages gained from digital integration in the shipping and logistics sector, and continued investment in its use, will help the sector more effectively and efficiently meet exporter needs and regional market demands.
The pandemic exposed risks inherent to global supply chains, pundits are predicting greater emphasis on shorter and diversified supply chains accommodating varied shipping methods including, as precautionary measures, inventory/warehousing located closer to markets.
The current pandemic is layered on many previous global economic shocks, each impacted differently, but coupled with evolving technology and innovative approaches – all influence society and the way we do business.