Off the coast of Los Angeles, more than two dozen container ships full of stationary bikes, electronics and other highly sought-after imports have been at a standstill for two weeks.
In Kansas City, farmers are struggling to send soy to buyers in Asia. In China, furniture destined for North America is piled on the floor of factories.
Across the planet, the pandemic has disrupted trade to an extraordinary degree, raising the cost of maritime freight transport and adding a new challenge to the global economic recovery. The virus disrupted the choreography of moving cargo from one continent to another.
At the center of the storm is the container, the flagship of globalization.
Americans trapped in their homes sparked a wave of orders from factories in China, many of them transported across the Pacific in containers – the metal boxes that transport goods in high stacks on huge ships. As families in the United States filled their rooms with office furniture and their cellars with mats, the demand for shipping exceeded the availability of containers in Asia, resulting in shortages there, just as the boxes accumulate in American ports.
The containers that transported millions of masks to countries in Africa and South America at the beginning of the pandemic remain there, empty and not collected, because the carriers have concentrated their ships on their most popular routes – those that connect North America and Europe to Asia.
And in ports where ships call, carrying goods to unload, they are often stuck for days in floating traffic jams. The pandemic and its restrictions have limited the availability of dockers and truck drivers, causing delays in handling cargo from Southern California to Singapore. Every container that cannot be unloaded in one place is a container that cannot be loaded elsewhere.
“I’ve never seen anything like it,” said Lars Mikael Jensen, head of the Global Ocean Network at AP Moller-Maersk, the world’s largest shipping company. “All the links in the supply chain are stretched. The ships, the trucks, the warehouses. “
Economies around the world are absorbing the ripple effects of the disturbance in the seas. Higher costs of shipping American grain and soy across the Pacific threaten to increase food prices in Asia.
Empty containers are stacked in ports in Australia and New Zealand; containers are scarce in the Indian port of Calcutta, forcing electronic parts manufacturers to transport their products by truck more than 1,600 kilometers west to the port of Mumbai, where supplies are best.
Rice exporters from Thailand, Vietnam and Cambodia are giving up some shipments to North America because of the impossibility of securing containers.
The chaos at sea proved to be a boon for shipping companies like Maersk, which in February cited record freight prices when reporting more than $ 2.7 billion in pre-tax earnings in the last three months of 2020.
No one knows how long the turbulence will last, although some experts assume that containers will remain scarce until the end of the year, as the factories that manufacture them – almost all in China – struggle to meet demand.
Since they were first deployed in 1956, containers have revolutionized commerce, allowing products to be packaged in standard size containers and lifted by cranes for wagons and trucks – effectively shrinking the globe.
Containers are how flat-panel displays made in South Korea are moved to factories in China that assemble smartphones and laptops, and how these finished devices are shipped from the Pacific to the United States.
Any obstacle means delay and extra cost for someone. The pandemic interrupted all stages of the journey.
“Everyone wants everything,” said Akhil Nair, vice president of global carrier management at SEKO Logistics in Hong Kong. “The infrastructure cannot keep up.”
Havoc starts like this
More than a decade ago, during the global financial crisis, shipping companies saw their businesses destroyed.
When a mysterious virus emerged in China at the beginning of last year – prompting the government to close factories to contain its spread – the shipping industry prepared for a repeat. The carriers cut their services, paralyzing many of their vessels.
However, even in the midst of the crisis, orders for protective equipment, such as surgical masks and lab coats, were used by frontline medical staff, many of them made in China. Chinese factories have grown and container ships have transported their products to destinations across the globe.
Unlike the financial crisis, when the economic recovery took years to gain momentum, Chinese factories returned in full force in the second half of 2020, generating a robust demand for shipments.
As shipping companies distributed all the ships that could float, they focused on the routes in greatest demand – especially from China to North America.
The pressure increased as the Americans reformed their spending. Deprived of holidays and meals in restaurants, they bought video game consoles and mixers. They equipped their homes for remote work and distance learning.
Gym equipment transported by containers from Asia to North America more than doubled between September and November, compared to the same period last year, according to analysis by Sea-Intelligence, a Copenhagen-based research firm. Shipments of stoves, stoves and kitchen equipment almost doubled during this period. Disinfectants increased by more than 6,800 percent.
“All the things that are growing were basically driven by a pandemic,” said Alan Murphy, the founder of the research group.
Viewed broadly, the volume of global trade fell just 1 percent in 2020 compared to the previous year. But that does not reflect how the year went – with a drop of more than 12% in April and May, followed by an equally dramatic reversal. The system was unable to adjust, leaving containers in the wrong places and taking shipping prices to extraordinary heights.
Peter Baum’s New York company, Baum-Essex, uses factories in China and Southeast Asia to make umbrellas for Costco, cotton bags for Walmart and ceramics for Bed Bath & Beyond. Six months ago, he was paying about $ 2,500 to ship a 40-foot container to California.
“We just paid $ 67,000,” he said. “This is the highest freight rate I have seen in 45 years in the business.”
In early September, he waited 90 days to secure space on a ship for a container of wicker chairs and tables.
Another US importer, Highline United, which imports women’s shoes from China and Hong Kong to brands like Ash, Isaac Mizrahi, is paying more than five times the normal price for shipping.
“It’s a classic supply and demand problem,” said Kim Bradley, director of operations for the company, based in Dedham, Massachusetts.
Traffic decreases in congested ports in California
In the twin ports of Los Angeles and near Long Beach, unloading was slowed by the shortage of dockers and truck drivers, as the virus got sick and forced others to quarantine.
“The backlog volume is expected to remain through mid-summer,” said Los Angeles port director Gene Seroka at a recent board meeting.
Ships off Los Angeles have exhausted the available berths, using so-called drift boxes – areas where they float freely, like planes flying over congested airports.
The major consumer brands – from sportswear maker Under Armor to Hasbro, the maker of games and toys – have been dealing with transportation bottlenecks.
Peloton points to port congestion as a factor behind his delays in delivering his state-of-the-art exercise bikes. To shorten waiting times, Peloton outlined plans to invest $ 100 million in air transport and accelerated sea freight.
But even in normal times, airfreight is about eight times the cost of seafreight. Most air freight is carried in the holds of passenger jets. With air travel severely restricted, cargo slots are also available.
Some senders reorganized their schedules, stopping in Oakland, California, 400 miles north, before continuing on to Los Angeles. But containers are stacked on ships in configurations defined by their destinations. A sudden change in plans means moving the stacks like a game of Jenga.
And the port of Oakland is dealing with its own pandemic problems. Dockers look after children who are not in school, said Bryan Brandes, the port’s maritime director.
“In normal times, ships come directly to Oakland,” said Brandes. “At the moment, we are ranging from seven to 11 vessels at the anchorage.”
Empty containers are being sent back to Asia
The dysfunction on the American West Coast caused problems thousands of miles away.
Scoular, one of the largest agricultural exporters in the United States, loads grain and soy in containers at terminals like Chicago and Kansas City and sends them by rail to Pacific ports en route to Asia.
Given the prices obtained for containers in Asia, hauliers are increasingly unloading in California and immediately placing empty boxes back on ships for their return journey to Asia, without waiting to load grain or other American exports. This left companies like Scoular struggling to secure approval.
Port delays often hinder Scoular containers on different ships, forcing the company to redo customs paperwork – another delay.
“It is the reliability of the schedule that is an issue,” said Sean Healy, Scoular operator relations manager. “It is a global problem.”
Nobody knows how it ends
In recent weeks, carriers have aggressively moved empty containers to Asia, increasing availability there, according to data from Container xChange, a consultant in Hamburg, Germany.
Some experts assume that as vaccinations increase and life returns to normal, Americans will again shift their spending – from goods to experiments – reducing the need for containers.
But even when that happens, retailers will start to build up inventory for the holiday shopping spree.
The spending stimulus plan underway in Congress could generate hires that could lead to another wave of purchases, as previously unemployed people replace old appliances and increase their wardrobes.
“There may be a whole other subset of consumers who are unable to consume,” said Michael Brown, container analyst at KBW in New York. “You are potentially facing a shortage for quite a while.”