The top containership carriers are bigger and more efficient but service disruptions show weaknesses in the industry.
Ocean carriers rarely make front page news, but in recent weeks the container business has made the news for reasons the industry would rather have avoided. There have been ongoing problems of congestion primarily at West Coast ports and the inability to expediently reposition equipment back to Asia for refilling. The lack of equipment for U.S. exports has led to complaints from American shippers to Washington that the carriers aren’t responsive to their needs. Freight rates have soared and this too has raised the ire of U.S. importers and exporters alike who are trying to dig themselves out from pandemic economics. And finally, the 20,000 TEU Ever Given made headlines worldwide by getting stuck in the Suez Canal. The ensuing backup of containerships spread through the global supply chain choking an already stressed supply chain and added to the ire of an already irritated shipping public. As if this wasn’t enough, hacks and other IT calamities have dogged carriers in ways once unimaginable and now becoming part of shipping life, like identity fraud is for shoppers. Still, through all the turmoil, the ocean carriers are making an almost unparalleled financial rebound – being dubbed the “disruption upside” – which again is a touchy issue among shippers and consumers that have endured lockdowns and layoffs for over a year and a half and haven’t shared in the carriers’ good fortune.
Supply Chain & Big Ships
At the Propellor Club of Northern California (PCNC) February 23rd Zoom meeting, Lars Jensen, CEO of Copenhagen-based SeaIntelligence Consulting gave a presentation of the state of container shipping and in particular the congestion facing the California ports of Los Angeles and Long Beach. Jensen’s presentation was a masterclass in shipping economics and on the critical question of what could be done to relieve congestion, he advised “patience” explaining only a lowering in demand would over time untangle the supply chain.
With approximately one percent of the world’s boxes sitting at anchor in San Pedro Bay, speeding up discharge at the expense of loading wouldn’t solve the problem. Nor would adding ships and more containers, which would only exacerbate the traffic jam in San Pedro Bay.
In a sense, the ocean carriers had to choose their poison – reposition the empties back to Asia as soon as possible to reload them with high value, light, consumer goods – or try to load them in the U.S. market with low value, heavy exports such as agricultural items – and lose time and potentially money in the process.
As Jensen explained, the whole mess began with the pandemic in 2020 and this is where “globalization shows its ugly side and when you have a global problem it effects every trade lane.” The pandemic caused a “massive drop in April and May …followed by an astonishing comeback.” And the comeback directly led to equipment…
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