In the last two years, they have multiplied by two, by three, by six, and even by ten between the end of 2019 and September 2021. And among all of them, the price increases on routes departing from China and the Far East in general.
This situation has come about due to the chain of various causes whose effects have added up and have caused this perfect storm that in less than two years has led to a 40-foot service between Shanghai and Valencia at
On the one hand, there is the confinement by the Chinese government of Wuhan and its province. This fact, beyond its importance in the production of many components necessary for industry around the world, was the first serious notice of the implications that COVID-19 could have for the world economy. Buyers around the world began to closely monitor the situation in China and began to create contingency plans in case other areas, where the suppliers they cared about were located, also suffered a lockdown. These contingency plans, in many cases, meant anticipating purchases to have a larger stock in the event of possible supply problems. Of course, this increase in stocks led to an increase in the demand for container transport, which was the first step in this price escalation, although it was not very pronounced because at that time many sectors were working at half throttle due to the restrictions of COVID-19 in almost the entire world.
When in the summer of 2020 the restrictions began to be relaxed and normal activity resumed, and that increase could not be met by the offer. Result: between August and December 2020 there were almost weekly increases on all routes out of Asia. The problem was already serious, although it was not yet discussed outside the logistics departments of importing and exporting companies.
We are entering 2021 and the rises continue, not so vertical, but without pause, and there are more and more comments about the shortage of equipment. Many more containers arrive at the ports of the United States and Europe than leave because many buyers keep them in the ports as their strategic warehouse. This has serious consequences, among them the reduction of the equipment available for new loads and busier ports, which hinders their operations and begins to influence their normal functioning. And as if this were not enough, it gets stuck in the Suez Canal and leaves it inoperative for six days; another big logistical problem for Europe’s supplies from Asia. At the end of April, when this crisis was considered over, is when the great escalation of prices began that would not stop until the end of September and that in those five months raised prices by more than 250% globally.
The increasing problems of congestion in the ports of the United States have undoubtedly contributed to this rise (the most commented example in recent weeks is Los Angeles, but it is not the only one). The lack of personnel and space delays all operations and generates long queues of ships waiting to be unloaded. And the worst thing is that it restricts the global supply of containers at a time of scarcity, because a ship waiting to be unloaded will take longer to return to providing its services. The delays in port operations have made it necessary to make new schedules on the routes and, despite this, new departure cancellations occur every week due to congestion problems. This implies a lack of control over when each container will arrive at its destination and therefore one more reason to expand stocks and inflate demand.
In the months of October and November there have already been ships leaving China for Europe with free space and this has brought the first significant price drops since June 2020. Some shipping companies are launching offers for these free spaces with quite significant reductions below the official rates are we before the beginning of the return to normality? Well, at the moment it seems not, but there are already analysts who say that we will approach it from February, once the peak demand for both Christmas and Chinese New Year has been exceeded. However, most continue to delay this approximation until the second half of 2022 or even February 2023, depending on the evolution of demand.
In any case, what everyone seems to agree on is that it will take a long time to see the prices we had two years ago again, as the shipping sector continues to concentrate, suffers from regulations due to increasing environmental issues and an urgent need to renew its fleet that is going to cost you a lot of money. In addition, after several difficult years in terms of results, the shipping companies are currently making a lot of money and therefore they are in no hurry to lower their prices.
They will, but it will be when they have no choice.
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