17th February 2021
After ending 2020 with container capacity constraints, especially in and out of Asia, the strong cargo demand continues in 2021. With that, equipment shortages are now a significant bottleneck to international trade.
In the last weeks, we received many inquiries around updates on the current equipment situation in shipping. And we know that you might wonder what precisely these equipment shortages are, how long they will last for and what you can currently do. That's why we are here to answer the most frequently asked questions, give you updates on the situation together with advice and recommendations for your business, so you can overcome challenges easier.
Why are we facing challenges in shipping right now?
In early 2020, the COVID-19 pandemic interrupted global trade. Consumers stocked up on supplies and shifted budget spends from services to actual products such as medical and home supply. Moreover, public fiscal stimulation increased shopping behaviours around the world. With that, importers in the US and Europe had to restock inventories in the second half of 2020. This created a backlog in international trade. As supply chains also got affected by the impact of COVID-19 and warehouse labour decreased, this caused a reduced speed of container turnaround.
Now, the strong demand is continuing in 2021, and many vessels are reserved up to one month ahead. Additionally, Chinese New Year leads to equipment shortages and results in challenges for international trade.
What do equipment shortages mean?
Equipment shortage in shipping reflects container shortages, describing that there are not enough containers to transport your goods on vessels. Especially in China, international trade is facing a lopsided balance. For instance, for every one container imported into China, three containers are being exported. Additionally, there are delays in containers being returned to China due to the global COVID-19 pandemic. And these severe shortages are now starting to pinch export flows.
Eva Yan Liu, North China Team Lead at Twill, explains that the current situation is particularly challenging in South China. Mostly empty 40-foot-containers are currently in short supply, reflecting a historic challenge in international trade. This shortage stems from two factors:
According to forecasts from previous years, a significantly lower number of new containers in 2020 compared to 2019 was manufactured: In the first half of 2020, container production decreased by 40% compared to the first half of 2019.
As the demand during the COVID-19 pandemic increased, more containers were loaded than initially expected.
Overall, this resulted in a significant drop in global container availability, meaning your cargo's transport is facing delays at many ports, especially in Asia, Europe and the USA. This leads to the fact that equipment is not flowing as it normally should. Your cargo might be stuck at a port and ports do not operate as they usually do, having only a reduced workforce in place. This problem is described as port congestion and it causes longer waiting times for your cargo at the ports.
The current shortage of containers is expected to be resolved with an increase in the manufacture and production – with more containers to be in circulation soon: according to Alphaliner, the nominal global container fleet will grow by 4% in 2021.
How long will the capacity issues in shipping last?
As previously discussed, the current situation will remain longer, and Chinese New Year is playing a crucial role here. During the public holiday factories and productions were closed, leading to a decrease in available goods – while the global demand remained high. The production gets typically up to full speed two weeks after the holidays. This year the holidays were staggered in many places to avoid the spread of COVID-19 and additional pressure on transport. This means that the production after Chinese New Year will be back to full speed sooner than it usually would be.
There are different forecasts within the industry. According to the Danish newspaper Børsen, Patrick Jany, CFO at Maersk, sees similarities of the shipping situation in 2020 also in 2021 – facing an extreme situation with high volumes, delays at the ports and a lack of containers. However, he expects the situation to normalise soon within this year.
Other analysts in the global supply chain industry predict that the time after Chinese New Year can be a turning point, returning to normal equipment levels in Shanghai and other major ports across China after that. Especially newly manufactured containers will ease the situation. The overall guidance from A.P. Moller-Maersk expects the exceptional situation to continue into Q1 in 2021, followed by a normalisation thereafter.
"The current capacity issues will likely extend up until the first half of 2021. Our Twillers in China and worldwide are doing their utmost to help customers ship their containers successfully. As the capacity and equipment situation is very dynamic and volatile, we strongly suggest customers to follow our updates on the knowledge hub and Social Media."
What are we doing to keep your cargo moving, and what can you do?
At Twill, we try our best to deliver your cargo on time. All our Twillers are working hard to get your goods going and give you frequent and real-time updates. Throughout this year’s Chinese New Year our services are running – avoiding usual blank sailings throughout this time.
We know the situation requires a lot of flexibility from you as our customers. We are here to support you, and we have listed some of our advice below. You can find out what you can do now to keep an overview of the situation and ensure smooth transportation for your goods.
Make use of different equipment: As especially 40-foot containers are scarce now, try to consider booking alternative equipment such as 20-foot containers to transport your cargo oversea.
Create an accurate and timely forecast: Check which containers you will need to send when and which of your cargo needs be to be prioritised. For instance, think about when specific products need to be in the shops. We will then prioritise the most time-sensitive cargo. With this, we will deliver an even better and more efficient experience for your business. If you want to find out how you can accurately forecast, check out this article.
Reach out to your logistics partner for alternatives: Here at Twill, we are currently working on other options for our customers to keep their cargo moving as smooth as possible. Sergio Puel, Area Manager South-West Europe and Maghreb, outlines: "Twill is here to help. Your local experts can give you options if your desirable equipment is not available at the specific port and try to find the best solution for you. We at Twill prioritise your cargo on board the vessel and give you the best alternative for every single departure to cover your needs."
Consider loading your cargo at a different port: Small ports in Asia such as Beijiao, Jiujiang, Jiangmen, Zhanjiang or Zhuhai are partly closed during the Chinese New Year holidays. Therefore, it can be easier to change the port where you want to load your shipment to a larger port as there is likely more equipment available.
Stay up to date: Do you wonder what is happening in shipping these days? We recommend you to read the latest updates around the situation – for example, via our knowledge hub. Here we provide you with the latest updates around the status and insights into logistics know-how.
