Jonathan Moss, Head of Marine and Trade, at DWF.law, comments on the shipping container crisis and how it is affecting businesses, consumers and insurers. He said:
“The supply chain has faced major disruption globally due to the shortage of shipping containers, particularly since the Covid-19 pandemic. With factories closing and transportation coming to a halt, many empty containers have been left at ports and the amount of vessels at sea dramatically reduced. Further, tighter restrictions, minimal staff, together with a backlog of containers have caused catastrophic problems for the shipping industry.
“Whilst shipping containers were being exported from China, as China recovered from the initial effects of the pandemic, a relatively small proportion arrived at their rightful destinations owing to the EU and US’s strict lockdown procedures. These caused significant delays for shipments, adding weeks and sometimes months to the cargo delivery time as ports were closed or operated with a skeleton workforce.
“Serious delays have meant freight companies paying over the odds to receive shipping containers quicker than their competitors. Freight costs have soared from early 2021 to now and the cost of shipping cargo from China to Europe has quadrupled.
“Consumer shopping has also been impacted. The usual steady supply of goods has been interrupted for many businesses as vessels wait to load cargo at overcrowded ports, particularly in China and the US.
“Many recently built container vessels are exceptionally large, limiting the ports they can berth at. If more medium sized vessels were constructed, there would be a greater opportunity for ships to berth, avoiding congestion and allowing ships to navigate more effectively. With the surge in online sales, however, there is an increasing need for very large ships to maintain this influx in cargo.
“Marine Insurers will feel the pain with notifications across various insurance lines as vessels are delayed, cargo is undelivered, contaminated and lost, with consequential losses and business interruption losses claimed along the way. The effects are, however, far more wide reaching for consumers who are facing a rise in the cost of every day essentials. Shipping delays are a significant disruption for containers and two blockages in the Suez Canal combined with the unprecedented effects of the pandemic have created a perfect storm. Container imbalance together with a shortage of containers is hurting global trade. Containers are building up in some ports and unavailable in others causing bottlenecks, adversely affecting buying patterns and driving up prices in the shops.
“Arguably, there is no quick resolution for the container crisis. It will take time before supply chains can be back on track globally. While there are suggestions that the shipping industry cannot keep up with global demand, improvements are being made. Key players in the supply chain are discovering ways the operation of vessels can become more resilient to unexpected change, including by the adoption of organisational changes, enhanced logistics operations and blockchain technology for smart contracts, approvals and customs clearances.”