The world’s cargo ships just can’t seem to get their act together.
First there were the queues at the twin ports of Los Angeles and Long Beach, which left as many as 40 container vessels awaiting a berth in early February amid a flood of traffic.
Combined volumes at the terminals hit a record of 1.9 million containers in May, nearly double the Covid-19 low in March 2020.
Then the Ever Given, a 20,124-container behemoth, got stuck in the Suez Canal for nearly a week, delaying hundreds of ships on their way between Asia and Europe. Now, the port of Yantian in the Chinese city of Shenzhen is joining the fun, thanks to a coronavirus outbreak that’s thrown out schedules for the entire month.
Wait, a coronavirus outbreak in China? I thought they had eradicated the disease with the kind of superior socialist management our oligarchs want to emulate.
If you think this is mostly a bit of local bother that will smooth itself out as the dislocations of a reawakening global economy ease off, you might be in for a shock. The factors that have driven Asia-Europe container rates to record levels of more than US$10,000 (RM41,500) per 40-foot box aren’t simply a temporary coordination problem. Returning to a semblance of normality could take years.
The container shipping industry is usually such a well-oiled machine that we barely notice it. Vessels carrying 10,000 containers can arrive at dawn and depart with new cargo by sunset.
Rates have at times drifted so low that in early 2016 you could shift a tonne of goods from Shanghai to Rotterdam for about US$10 (RM41.47) – and even then, the world’s biggest shipping line, AP Moller-Maersk A/S, was able to turn a modest operating profit.
The flip side of that is that when things go wrong, they go seriously wrong.
Part of the problem has been that containers aren’t in the right places. In global terms, trade enjoyed a remarkably short and sharp pandemic. By September last year, volumes were already running ahead of their seasonally adjusted levels in January and February, as demand for medical equipment and spending on durable goods picked up in rich countries.
Trying to make all those deliveries on time meant that many vessels started making their return journeys empty, saving a few precious hours that would normally be spent picking up vacant boxes to ship back to China.
That’s resulted in a glut of containers in European and North American ports and a shortage in Asia, pushing freight rates to astronomical levels on export routes.
Remember, the inflation we’re seeing now is transitory.