Off the coast of Los Angeles, more than two dozen container ships filled with exercise bikes, electronics, and other coveted imports have been idle for two weeks.
In Kansas City, farmers are struggling to supply soybeans to buyers in Asia. In China, furniture for North America is stacked on the factory floor.
Around the planet, the pandemic has severely disrupted trade, increased the cost of shipping goods and posed a new challenge to the global economic recovery. The virus has abandoned the choreography of moving cargo from one continent to another.
At the center of the storm is the shipping container, the workhorse of globalization.
Americans stuck in their homes have sparked a wave of orders from factories in China, much of which have been shipped across the Pacific in containers – the metal boxes that move goods in high piles on giant ships. With US households filling bedrooms with office furniture and cellars with treadmills, demand for ships has outpaced container availability in Asia, creating bottlenecks there, just as crates pile up in American ports.
Containers that transported millions of masks to African and South American countries at the start of the pandemic remain empty and uncollected as shipping lines have focused their ships on their most popular routes – those connecting North America and Europe with Asia.
And in ports where ships call and carry goods to be unloaded, they are often stuck in floating traffic jams for days. The pandemic and its restrictions have limited the availability of dock workers and truck drivers, and delayed the handling of cargo from Southern California to Singapore. Any container that cannot be unloaded in one place is a container that cannot be loaded in another place.
“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 tense. The ships, the trucks, the warehouses. “
Economies around the globe are absorbing the effects of the disruption on the seas. Higher cost of shipping American grain and soybeans across the Pacific threatens to raise food prices in Asia.
Empty containers are stacked in ports in Australia and New Zealand. Containers are scarce in the Indian port of Kolkata, forcing electronic parts manufacturers to move their goods more than 1,000 miles west to the port of Mumbai, where supplies are better.
Travel exporters in Thailand, Vietnam and Cambodia are foregoing some deliveries to North America because it is impossible to secure containers.
The chaos on the seas has proven to be a gold mine for shipping companies like Maersk, which led record-high freight prices in February with pretax profits of more than $ 2.7 billion in the final three months of 2020.
Nobody knows how long the upheaval will take, although some experts believe containers will remain scarce by the end of the year as the factories where they – almost all of them in China – have to catch up with demand.
Since their first use in 1956, containers have revolutionized commerce by making it possible to pack goods in standard-sized containers and lift them onto rail vehicles and trucks using cranes – effectively shrinking the globe.
Containers describe how flat screens made in South Korea are relocated to factories in China where smartphones and laptops are assembled, and how these finished devices are shipped across the Pacific to the United States.
Every problem means delay and additional cost to someone. The pandemic disrupted every part of the trip.
“Everyone wants everything,” said Akhil Nair, vice president for global carrier management at SEKO Logistics in Hong Kong. “The infrastructure cannot keep up.”
The devastation begins like this
More than a decade ago, during the global financial crisis, shipping companies saw their businesses hit.
When a mysterious virus emerged in China early last year, causing the government to shut down factories to curb its spread, the shipping industry prepared for a repeat. Transport companies ceased their services and left many of their ships idling.
But even amid the downturn, orders for protective equipment such as surgical masks and gowns, used by frontline medical workers and largely made in China, continued to grow. Chinese factories picked up speed and container ships transported their products to destinations around the world.
Unlike the financial crisis, when the economic recovery took years to gain strength, Chinese factories roared back in the second half of 2020, creating robust demand for shipping.
March 6, 2021, 6:57 p.m. ET
Since the shipping companies used every ship that could swim, they focused on routes with the greatest demand – especially from China to North America.
The pressure rose as Americans restructured their spending. With no vacations or restaurant meals, they bought video game consoles and mixers. They equipped their homes for remote working and distance learning.
According to an analysis by Sea-Intelligence, a Copenhagen-based research company, training equipment shipped by container from Asia to North America more than doubled between September and November compared to the same period last year. Deliveries of ovens, stoves and cooking appliances have almost doubled during this time. Disinfectants increased by more than 6,800 percent.
“Everything that has grown was basically triggered by a pandemic,” said Alan Murphy, the research group’s founder.
In general, the global trade volume in 2020 decreased by only 1 percent compared to the previous year. That doesn’t reflect the way the year went, however – with a drop of more than 12 percent in April and May, followed by an equally dramatic reversal. The system failed to adapt, left containers in the wrong places and pushed shipping prices to extraordinary heights.
Peter Baum’s New York company, Baum-Essex, has factories in China and Southeast Asia making umbrellas for Costco, cotton bags for Walmart, and ceramics for Bed Bath & Beyond. Six months ago, he paid about $ 2,500 to ship a 40-foot container to California.
“We just paid $ 6,000 to $ 7,000,” he said. “This is the highest freight rate I’ve seen in business in 45 years.”
At the beginning of September he waited 90 days to make room for a container with wicker chairs and tables on a ship.
Another U.S. importer, Highline United, which imports women’s shoes from China and Hong Kong for brands like Ash and Isaac Mizrahi, pays more than five times its usual shipping price.
“It’s a classic problem of supply and demand,” said Kim Bradley, chief operating officer for the Dedham, Massachusetts-based company.
Traffic is secured in the jammed ports of California
In the twin ports of Los Angeles and nearby Long Beach, unloading has been slowed by a shortage of dock workers and truck drivers as the virus has made some sick and quarantined others.
“The volume congestion is expected to persist through midsummer,” said Port of Los Angeles director Gene Seroka at a recent board meeting.
The ships off Los Angeles have exhausted the available anchorages and are resorting to so-called drift boxes – zones in which they float freely, like planes circling over congested airports.
Major consumer brands – from sportswear maker Under Armor to Hasbro, the game and toy maker – have been addressing shipping bottlenecks.
Peloton points to port congestion as a factor in delays in delivering its high-end stationary bikes. To cut waiting times, Peloton outlined plans to invest $ 100 million in airship and expedited ocean freight.
But even in normal times, air freight is roughly eight times the cost of shipping. Most of the air freight is carried in the holds of passenger jets. Since air traffic is severely restricted, there are also cargo spaces available.
Some shippers have changed their flight schedules and stop in Oakland, California 400 miles north before continuing on to Los Angeles. However, containers are stacked on ships in configurations determined by their destinations. Suddenly changing plans means moving the piles around like a Jenga game.
And the Port of Oakland is grappling with its own pandemic problems. Dockers look after children who are out of school at home, said Bryan Brandes, the port’s sea director.
“In normal times, ships come straight to Oakland,” Brandes said. “At the moment there are between seven and eleven ships at anchor.”
Empty containers are sent back to Asia
The malfunction on the American west coast created problems thousands of miles away.
Scoular, one of the largest agricultural exporters in the United States, loads grain and soybeans into containers at terminals such as Chicago and Kansas City, then ships them by rail to Pacific ports en route to Asia.
Given the prices that containers fetch in Asia, California shipping companies increasingly unload and then immediately put empty boxes back on ships for the return voyage to Asia without waiting to load grain or other American exports. That got companies like Scoular to secure passage.
Delays in ports often encounter Scoular’s containers on different ships, forcing the company to redo its customs papers – another delay.
“It is schedule reliability that is an issue,” said Sean Healy, Scoular’s carrier relations manager. “It’s a global problem.”
Nobody knows how this ends
In the past few weeks, freight forwarders have been aggressively relocating empty containers to Asia, increasing availability there. This is based on data from Container xChange, a consultant in Hamburg.
Some experts believe that as vaccinations increase and life normalizes, Americans will shift their spending – from merchandise back to experience – again to reduce the need for containers.
But even in this case, retailers will start building up inventory for the vacation shopping spree.
The stimulus spending schedule moving through Congress can create attitudes that could spark another wave of buying as previously unemployed people replace aging gadgets and expand their wardrobes.
“There could be a whole different subset of consumers who couldn’t consume,” said Michael Brown, container analyst at KBW in New York. “You may have been facing some bottlenecks for some time.”