Why freight shipping is slower now because of world events

Maritime trade has been deeply disrupted for more than a year. Freight prices have skyrocketed and delays are piling up at all major cargo ports.

While the blockage of the Ever-Given mega-ship in the Suez Canal left its mark last March, the event is only a symptom of a deeper disorganization of the maritime freight sector. Since the recovery of the global economy this summer, a cascade of events more or less unexpected by the sector has weakened many supply chains.

The blockage of the Suez Canal for almost a week last March by the Ever Given has triggered a new spike in cash freight rates. These rates had begun to stabilize after historic highs during the COVID-19 pandemic.

Sea freight rates being a major component of trade costs, this new increase is an additional challenge for the global economy as it works to recover from the worst global crisis since the Great Depression.

We are now witnessing an unprecedented surge in container prices, these metal containers emblematic of globalization that have, in recent months, almost quadrupled.

In the first quarter of 2020, the health crisis hit Asia hard and the shock surge is spreading in Europe and the United States. Everywhere, health-related restrictions are causing production volumes of goods and services to decline and world trade is experiencing a historic decline.

The facts

In just a few months, the price of a container from Asia has quintupled. The recovery of maritime cargo after the first lockdown has created bottlenecks in major ports around the world. There is a shortage of cargo ships and containers from Asia. European importers of products ranging from household appliances and furniture to dried fruits and toys are seeing their margins squeezed.

Companies around the world are facing a glaring but unknown difficulty for the general public: in a few months, the transport of goods from Asia has become very expensive, very slow and very uncertain. In September, a conventional 40-foot container (the size of a semi-trailer) could be brought in from China for $1,500. Now they have to pay about $10,000. And still, half of the boats arrive late (often several weeks) and scheduled stopovers are not always served.

Behind the dramatic increase in the value of maritime national freight services lies the so-called “container crisis” – an unusual shortage of space available to transport products from Asia to the West. In addition to the lack of containers, there is congestion at the largest international ports and the temporary closure of some marine terminals due to the strict control measures related to COVID-19.

Rebound in global demand

Subsequently, global demand experienced an unexpected rebound in intensity. The massive stimulus plans undertaken by the United States and Europe are causing a strong demand for goods, especially electronic goods. The savings accumulated by households and the massive use of telework are promoting the growth of e-commerce. Americans and Europeans order mainly assembled material online in Asia. After several months of reduced orders, the companies started a major restocking to anticipate the recovery.


According to shipping experts, the pandemic has triggered one of the most severe crises since containers began to be used during the Second World War.

Consumers feel it when they see product delays, shortages or price increases.

The pandemic has created all kinds of supply chain imbalances, ranging from a shortage of raw materials or labour to a lack of space on cargo ships and marine terminals.

Much of this is a legacy from last year. When companies reduced their purchases in the context of config, many trucking companies also reduced their operations.

But when demand resurfaced in many parts of the world this year, experts say the shipping system was not prepared for this recovery.
If we add to that the temporary closure of port terminals in China or the closure of factories in countries like India, Vietnam or Bangladesh because of the pandemic, the picture becomes even more complicated.

About 80% of the goods we consume in the world are transported by sea, according to estimates by the United Nations Conference on Trade and Development.

So if the container tariffs are too high, it will end up hurting consumers.

Soaring prices in developing regions

The impact on freight rates has been greatest in developing regions, where consumers and businesses can least afford it.

Currently, rates to South America and West Africa are higher than to any other major trading region. In early 2021, for example, freight rates from China to South America soared 443%, compared to 63% between Asia and the east coast of North America.

Part of the explanation lies in the fact that China’s routes to South American and African countries are longer. More ships are needed to provide weekly service on these routes, which means that many containers are also “blocked”.

Another factor is the lack of cargo to return containers. Countries in South America and West Africa import more manufactured goods than they export, and it is costly for carriers to return empty containers to China with long journeys.

How to avoid future shortages

To reduce the likelihood of such a situation occurring again, there are three elements to consider: advancing trade facilitation reforms, improving maritime trade monitoring and forecasting, and strengthening national competition authorities.

First, policymakers must implement reforms to make trade easier and less costly. Many of them are in the World Trade Organization’s trade facilitation agreement.

Second, policymakers must promote transparency and encourage collaboration throughout the maritime supply chain to improve the tracking of ship stopovers and timetables.

Finally, governments must ensure that competition authorities have the resources and expertise to investigate potentially abusive practices in the shipping sector.

While the pandemic is at the heart of the container shortage, some carriers may have delayed the repositioning of containers from the onset of the crisis.

Leave a Comment

Your email address will not be published. Required fields are marked