It’s no surprise that COVID-19 has had a monumental impact on many international industries. For an international shipping industry, already dealing with the concurrent challenges of a global container shortage, huge increases in shipping rates and historically low on-time performance rates, the recent Suez Canal blockage came as an untimely kick in the guts.
International traders are incurring substantially higher costs, in many cases facing increases of 1,000% or more. At the same time, the shipping reliability rate is at an all-time low. For the month of March 2021, less than 35% of international shipments arrived on time. How did things get so bad?
The COVID-19 pandemic resulted in manufacturing shutdowns, massive job losses and stuttering economies, which meant a steep and unexpected reduction in trade – both imports and exports. Container producers reacting to the fall in demand were taken by surprise in the second half of 2020, when pandemic-related cargoes diverted some 25 million containers off their normal routes.
The virus lockdowns triggered a fundamental shift in consumer spending in 2020. Consumers turning to online shopping with consumers using international travel and service expenses for goods instead.
The significant trade imbalances between countries has created severe container shortages in some places, and major surpluses in others. For example, container yards in Australia are no overflowing, to the extent that importers are unable to dehire unpacked containers, while exporters in China are struggling to get containers for their export shipments.