A perfect storm of pandemic-induced challenges, extreme weather events, trade wars and surging demand has impacted the global shipping industry over the past 18 months, and continues to cause enormous headaches for chemical companies and their downstream industries.
When the COVID-19 pandemic hit at the start of 2020, global demand for shipping cargo plummeted during those first five months. A handful of the world’s largest container ports in China shut down as production slowed to a halt, causing exports to drop and sailings to be cancelled as global shipping lines responded to the demand slump.
Surprisingly, demand quickly reversed, as online consumer buying trends surged during lockdowns and certain industries bounced, which caused the reverse problem: the demand was there, but supply couldn’t keep up. It didn’t help that the pandemic continued to impact personnel availability at the ports, as workers (and their ships!) were forced into quarantine, shutting down major ports and severely impacting throughput and deliveries.
In particular, shipping container availability became — and still remains — a huge challenge, as empty containers were stockpiling in the ports that didn’t need them, and were scarce at those that did, particularly throughout Asia.
Freight rates started rising as a result.
If that initial impact of the pandemic wasn’t enough, a series of other “black swan” events contributed to the crisis.
One of the more significant for our industry — the chemicals industry — occurred in February 2021, when the big freeze in Texas caused mass blackouts and shut down major chemical plants, causing a global shortage in the key chemical raw materials required for everything from plastic face shields and auto parts, to computers and smartphones.
Then in March 2021, the Suez Canal — which handles 12% of global trade — was completely paralysed for 6 days by the grounding of the Ever Given, exacerbating the already huge delays in consumer items and raw materials globally, and preventing nearly US$10 billion worth of trade as hundreds of ships queued up to pass through the canal.
Businesses relying on ocean freight movements have been confronted with two very unwelcome impacts: long delays, and skyrocketing costs.
Speaking with our industry partners, ChemCloud has seen shipping rates increase by 400–600% over pre-pandemic rates for full container (FCL) shipments out of key locations in Asia to Australian ports. LCL shipments are almost out of the question given the current economics.
Lead times have also increased, as some of our partners are seeing journey times double compared to those seen just 12 months ago, as shipments out of places like the USA are taking up to 14 weeks in some cases. Finding availability on vessels is also an issue, with some export businesses struggling even to find spots on ships between Australia and New Zealand.
Unfortunately, it doesn’t appear as though the supply and demand side of things will normalise any time soon. We expect these issues will remain at least through the rest of 2021. In addition to the current events impacting the global shipping industry, there are still longer term concerns impacting container throughput, including the limited capacity for ports to clear the ever-increasing volume coming through on larger and larger vessels.
With many of these events truly outside of the shipper’s control, it’s important to focus on those things that are within our control. Transparency and proactive communication is key so that expectations can be managed, and customers can prepare production and delivery schedules accordingly.
The shipping crisis has also reinforced the need for businesses to build resilience into their supply chains, reducing reliance on a single supplier by working hard to discover alternative sources of supply and alternative product solutions. ChemCloud is here to help you do just that.
