The logistics supply chain is finding it extremely difficult to deal with the repercussions of the global outbreak of the COVID-19 Delta variant. It is slowing the expected economic recovery.
A creaking logistics supply chain has been hit hard by the repercussions of the global spread of the Covid Delta variant as some Chinese ports are forced to stop operations at the behest of the Government causing significant numbers of vessels to be delayed. The various integrated network operations makes it extremely difficult to re-route the large containerships to alternative ports that remain functional as those are being sufficiently well served by existing services.
The knock-on effect is that as ports re-open, a large number of vessels load and sail for Europe and the USA subsequently causing congestion upon their arrival at their destinations. Los Angeles/Long Beach are experiencing up to 20+ vessels waiting to be discharged, with average waiting times of eight days.
The disruption to the supply chain is further aggravated by labour shortages which result in backups at ports distribution centres, container depots and a lack of availability of trucking and rail equipment. All this leads to the interrupted return flow of empty containers. Importers and exporters are unhappy and looking for someone to blame, usually the carriers.
The squeeze on shipping capacity is driving up freight rates and vessel charter rates to astronomic levels not experienced before. Whilst carriers and owners are struggling to deal with capacity issues, they continue to benefit from unprecedented income which has led to a surge in new vessel orders, particularly in the ultra large sector. Most of these are for delivery by 2023 which will probably coincide with excess demand and we will be back in the typical shipping cycle of excess capacity. As I wrote in the last issue of PS, make hay while the sun shines!
Ports and terminal operators are struggling to keep up with demand and finding enough space to store the surge of cargo arriving as importers are slow to pick up boxes in the face of insufficient equipment to haul them out and carriers leaving empty boxes behind as they try to position vessels back to China. The arrival of a host of new 24,000TEU ships over the next two years will create major stress points on quay and terminal space.
