Shipping crisis: Why giant ships aren’t enough

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Jared Chaitowitz owns a rental bike fleet that includes around 300 bikes. To keep the bikes running, he relies on an ongoing supply of spare parts, from bells and pedals. There’s just one problem.

Up Cycles’ Mr Chaitowitz says that the guy who supplies us with the tyres we use for our bikes gave us an earlier year a 10- to 12-month waiting period. It’s been difficult.

A global pandemic spurred a cycling boom, resulting in an increase of demand for bicycles while wholesalers were hit by a shortage of shipping containers worldwide.

Chaitowitz has multiple challenges in order to maintain his business. Chaitowitz is still waiting on a shipment with 50 bikes, but he claims he doesn’t know when.

A local company asked Chaitowitz to fix some bikes that were meant to be donated to charity. The charity work has been put on hold by Mr Chaitowitz, who can’t find the parts he requires.

Chaitowitz is known for sourcing parts from local shops. He says that they have been very helpful and generous many times. It’s not an ideal solution.

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Many businesses have had similar problems lately, including Mr Chaitowitz.

Lockdowns caused an enormous drop in retail sales. This was followed by which saw a sharp rebound, as countries opened up again.

Currently, many container ships are waiting in line to get access to over-loaded ports. Most of these port destinations are located in China and the US.

Additionally, it’s more difficult to transport containers once they are on the ground in Europe than in America due to a shortage of lorry drivers. The traffic congestion has been further complicated by the closure of ports due to Covid-19 epidemics.

Stories of containers sitting on the quaysides for many months have become commonplace. Container prices are skyrocketing.

One 40ft container to be shipped from Asia to Europe will cost $17,500 (PS12.650). This is more than 10x the amount paid a year ago according George Griffiths editor, global container markets, S&P Global Platts.

He also said that shipping companies now charge premium rates in order to ensure delivery within the next few weeks. Importers, meanwhile, are trying to outbid each other by offering more cash for their containers.

Griffiths says that “it’s starting to bite on the market.”

Perfect storm?

This begs the question: Is this a temporary supply chain glitch or is it a signal that container shipping, the world’s largest and most powerful commodity, cannot keep up with the changing world?

Rose George (author of Ninety Percent of Everything), a book on the shipping industry, said that the container shipping industry “is creaking” due to high demand.

She adds, “It has always been absolutely essential. It’s just not been noticed.” The current economic crisis has highlighted how important shipping is for the global economy.

Some large businesses are now able to charter their own vessels and purchase containers from other companies to meet shortages. The US mega-stores Walmart and Home Depot and Ikea in Sweden are just a few of them.

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Ikea spokeswoman confirmed that they have purchased additional containers and chartered vessels to remedy a shortage.

She adds that “We also have sent goods via train from China to Europe, and have invested in interim warehouses in China Vietnam, India and Indonesia to support production.”

Numerous industries, from toys to cars and even the shipping industry itself depend on containers being moved steadily around the world.

Stavros Karamperidis is head of University of Plymouth’s Maritime Transport Research Group. He says that he has a feeling that “we’re going to have empty shelves.” This refers to Christmas. He adds that the UK’s severe shortage of lorry drivers could lead to this being especially apparent in Britain.

The UK’s shortage of truck drivers is particularly severe due to the exodus of EU workers following Brexit and the effects of the pandemic. Tax changes also made it more difficult for foreign-born drivers to find work in Britain.

Shipping companies are predicted to record huge profits in this year. However, the problem continues to plague them.

Concepcion Boo Arianas is a spokesperson for Maersk. Maersk is the biggest shipping container company in the world.

She says that delays in ports have a knock-on effect on ships’ schedules. Two weeks can be added to the journey time of a container ship if there is a delay in one port for merely 1-2 days.

Current pressures create awkward situations, such as empty container piling up at certain ports and becoming scarce elsewhere.

What can we do?

Jack Craig is the head of APM Terminals’ global technical department, owned by A.P. Moller-Maersk emphasizes the importance of data and automation in ports. The automated checkpoints in Gothenburg, Sweden that scan all containers entering the port have reduced idle times by 30%.

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Large infrastructural investments are more difficult. It takes two to three years for a container ship to be built. Therefore, any vessel ordered today will not help in the long-term.

Griffiths says that companies may be hesitant to expand their fleets now that they are uncertain how best to comply with new shipping industry emission regulations, which will come into effect in 2050.

He explains that it is a costly error to order 10 large container ships, which could cost $100-200m each, and if they aren’t available by 2050, it will be a huge financial loss.

Container ships have grown in size over the years. This container ship is the largest one in the world. It can store nearly 24,000 equivalent units (twenty foot equivalent unit). That would mean that 24,000 containers (20 ft) could be loaded onto one vessel.

These ships, however, require huge, deep ports with giant cranes. This limits their ability to travel. According to Dr Karamperidis, they also put a greater demand on the ports that receive them. Dr Karamperidis believes that more medium-sized vessels will help make future supply chains more reliable.

Kay Levinson

Marc Levinson is an economist who wrote Outside the Box about globalization and container shipping. He agrees with the statement that smaller ships make it easier to transport.

Dr Levinson says that companies may need to reconsider their dependence on global supply chains, which bring products or parts from one factory halfway around the globe. Although this approach is cost-effective, it requires that everything work as expected.

Dr Levinson says, “The shipping crisis really has pointed out the dangeriness of such kinds of business strategies.”

Ms George suggests we all need to rethink our purchasing habits. She says that she doesn’t know what the future holds. But I hope that it contributes more to reducing consumption.

In Cape Town, Mr Chaitowitz is open to the possibility of local sourcing to avoid the hassles of shipping internationally. However, he acknowledges that it’s not a feasible solution.

He says, “All the small things that go into a bicycle can be made in Asia so I don’t know how locals would ever compete.” It seems that we are trapped within the system.

Publié at Tue 14 Sep 2021, 00:30.35 +0000

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