When would I receive my Sandstone order?
Did you ship the Natural stone shipment?
Did the ship reach the port?
How much more I have to wait for the container to arrive at my place?
Is there a shortage of containers? Why are the shipping costs so high these days?
Every Indian stone manufacturing company is continuously bombarded with such questions these days. It’s a tough time for them to survive in this global container shortage, all due to the long-standing Covid 19 pandemic, which started back in late 2019.
Presently, the world does not have enough containers in the required places to cater to the cargo demand. It’s a challenging situation that has persisted for a long time now.
Where lies the problem in Global Container Shortage?
To understand the problem, we need to take a step back and talk about the standard shipping times.
The container shipping industry has been an ever-green business, thanks to the rising global import and export. Vessels carrying tens of thousands of containers can arrive and depart within the same day. In early 2016, one could ship a metric ton of goods from Shanghai to Rotterdam for about $10 – and even then, close on a modest operating profit.
The major deadlock began with the worldwide lockdown forcing the vessels and containers to halt where they are, causing a glut of the containers.
One part of the problem has been that containers aren’t in the required places. Interestingly in global terms, trade blossomed around a short and sharp pandemic time. By the end of last year, trade volumes were already running ahead of their schedules, as the demand for medical supplies and spending on durable goods skyrocketed in wealthy nations.
Now to cater to all those deliveries on time and in repeat mode only meant that most of the vessels started their return journeys empty, not picking up vacant boxes to ship back to China, which would save a few precious hours. This practice resulted in a glut of containers in North American and European ports and a shortage in Asia, eventually accelerating the shipping rates to a new high level on export runs.
So these sharp price differentials with the lower cost on the return side are trying to bring the balance back to the shipping industry. Going by the numbers, more than 360,000 empty containers were returned last month, roughly double the usual rates.
From the Container manufacturers and lessors
Typically, if the market conditions are profitable for the container lessors, the tighter the box capacity will make the cargo shippers pay extra to the liner transporters.
Globally, 3 Chinese companies named CIMC, DFIC, and CXIC — produce around 80% of the world’s containers. Production is going on briskly, with estimates for 6%-8% growth. However, boxes aren’t being built fast enough to ease the capacity crunch.
The more significant issue will appear once the world’s boxes are where they need to be and the rapid increase in container production. Yes, you guessed it right; it will be a situation of an orgy of ships and hence the massive amount of port fees which will again cause the prices to go steep. A constant check is needed in place to cater to the current demand and also to be able to maintain a competent port fee.
Other factors
Covid 19 had a significant impact on the global trade, not only limited to the shipping industry; however, the slowdown had been going on for some time before that, thanks to former President of the US Donald Trump’s trade wars mainly focusing on China. Traffic had been trending low ever since the trade war announcement and could only retain its earlier levels at the start of 2020.
Considering the above-listed factors impacting the trade, the freight industry has been holding back on the investment in anticipation of a global economy in which trade would be playing a minor role.
When do we come out of the container scarcity?
Relief from container shortage is not just linked to the production trends. Numerous containers have been held up in port congestion and by unlikely issues such as the Ever Given accident in the Suez Canal. When such logjams clear, more containers are expected to be available.
India Natural stone manufactures are only expecting the buyers to be extra patient during these tough times as they are working hard to tie up with new shippers for the delivery along with talking amongst themselves finding new ways for a quicker delivery.
To sum up, a booming world trade economy which is mostly dependent on a shipping industry never expected such misfortune.
The chaos and costs on the high waters will certainly turn around, however as big things take time to build up, it’s going to be a while when the situation becomes normal.
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