Global Shipping Crisis 2021: Know Everything To Manage Your Supply Chains
The international shipping crisis has shaped itself to impact every industry, from exercise equipment to machinery or consumer industries. Let’s unfold the global shipping crisis 2021 and how to stay ahead in the time when a crisis is extending itself to show even severe implications on international trade.
We are soon going to reach the second anniversary of the most horrible pandemic of the world in the last century. The global pandemic of COVID-19 had disrupted the industries, disturbed the logistics, supply chains, and whatnot.
The global pandemic was not the only reason that had changed different industries and trade across the world. The aftermath of the COVID-19 was even worse than the pandemic itself. Most importantly, the sea freight has suffered the most –initially due to industry closures leading to the demand-supply gap and later, the sea transport congestions followed by the pandemic.
Seafreight and trade account for 90% of the global trade, and therefore, the havoc caused by the recent shipping crisis has severely affected businesses across Asia, Europe, and America. One brand or industry cannot reverse the implications of the crisis. However, if we know everything about the shipping crisis, there is a better chance for us to manage our business effectively by preparing ahead.
Why Is There Shipping Crisis?
The worst shipping crisis that the world is facing right now is not only due to the pandemic. But the incident of the Suez Canal also had an impact on how the global trade across seas happened.
According to a prominent shipping company board member, ‘ I don’t think anyone’s ever seen anything like this in their careers, anyone who’s alive.’ He gave this statement about the impact of the pandemic and shipping crisis on global trade in an interview with Yahoo Finance.
The reasons behind the current shipping crisis can be summed up as:
- Spike in demand for consumer and industrial goods across the world
- Lockdown in Asians Markets, specifically China
- Closure of Ports in China due to COVID-19
- Incident of Suez Canal
These primary reasons have contributed a lot to shaping the current shipping crisis we are going through.
Spike in demand for consumer and industrial goods across the world
As soon as the industries, schools, universities, and offices were closed after the pandemic, the demand for office supplies, equipment, computers, etc., increased worldwide. It was fueled by the work-from-home model, which most of the countries were into.
Besides, many consumers have shifted toward online shopping than conventional brick-and-mortar purchases. It put pressure on the supply chains and manufacturing companies. Due to lockdowns, workers shortage, and transport closure, the logistics were not as smooth as before.
Lockdown in Asian Market
China is the biggest Asian market that is disrupting the global markets for exporting its goods. As the global pandemic unfolds from China to other parts of Asia, Europe, and America, the governments of major economies announced lockdowns across the countries. This led to shipment delays and port congestion. It was also followed by the delayed unloading and port clearance of vessels and containers that arrived in America.Closure of Ports in China
Soon after the world entered the second year of pandemic, the situation improved due to vaccine provision. The trade experts expected global trade to come back to normal by the end of 2021. However, the non-linear nature of the global pandemic soon showed its new weapon, Delta Variant.
As we entered the 3rd quarter of 2021, China had closed its world’s third busiest port of Ningbo-Zoushan for two weeks after a worker tested positive for COVID. Later on, the air freight from China also suffered after the Chinese government decided to close two terminals at Shanghai Pudong International Airports. Earlier in June, China had temporarily closed the operations at Yantian Port too.
Suez Canal Incident
Earlier, at the end of March 2021, Ever Given, a container ship, was stuck on Egypt’s Suez Canal shore. The 400-meter long ship hit the banks due to sand storms, winds, and probably due to the crew’s mistake. However, it blocked the Suez Canal for a week, and the transport was delayed, according to the world maritime news. This incident has contributed to the unfolding of the global shipping crisis we are going through because 12% of global trade is made through the Suez Canal only.
Global Shipping Crisis Explained
What were the implications of international shipping issues 2021 and the ocean freight delays? Let’s discuss them.
Every three containers exported from China are returned with only one container of imports. This led to a decrease in the number of empty containers at Chinese ports. Therefore, the shipments had to wait for space in containers due to these prevailing problems, leading to ocean freight delays in 2021. The sea freight was only 30.9% reliable as of May 2021.
The sudden spike of capacity shortage couldn’t be overcome with new purchases of containers. Therefore, the world entered into the global crisis of international maritime problems in 2021.
Low Equipment and Docking Staff
Due to the shortage of containers and a small number of docking staff, shipping and freight forwarding didn’t remain flexible and smooth. The shipments had to wait at ports before getting shipped to their destined countries. The closure of Ningbo-Zoushan port and Yantian Port also delayed shipments moving to Europe, North America, and other Asian markets.
Sea Transport Congestion
Sea transport congestion was primarily due to the overwhelming number of containers moving toward Europe and America from Asian markets. When a large number of vessels and containers were arriving on the ports of America, it led to delay in unloading the containers and consequently delayed future shipments.
The terminal and port congestion also turned out to be worst in Europe and America. As of May 2021, the containers had to suffer a two-day wait in Europe, 2.5 days in the Eastern ports of the USA, and ten days in the Western ports of the USA.
The incident of the Suez Canal also proved to turmoil the prevailing crisis. Although Western trade was not impacted by it, the Middle Eastern, European, and Asian trade suffered due to the blockage.
When the shipments were delayed, port congestion was spiking, and carriers were struggling to meet the orders and demand, the warehousing turnover in the US markets was also suffering. It led to a demand-supply gap. Although the demand was spiked than what it was last year, it rippled the effect due to the back-end forces of sea freight.
Spike In Ocean Freight Price
The worst and most frustrating impact of the crisis that won’t reverse in the future is the spike in ocean freight prices. Due to a shortage of capacity, containers, and vessels, the shippers had to pay premium prices for moving the freight. The freight prices from Asia-Europe and Asia-America are the highest because of the crisis.
The Shanghai-Rotterdam route in the Netherlands witnessed the highest price jump. The cost of a 40-foot container had spiked by 659%, reaching $13,698.
The incident of the Suez Canal left 400 vessels to face delays in transport and consequently the increase in the prices.
When Will The Shipping Crisis End?
It might take 4 to 6 months before the ocean freight delays and international maritime problems in 2021 can be overcome. However, some of the factors like freight costs won’t reverse completely.
According to some estimates, the world sea freight trade might not be able to become normal until 2023.
It is also expected that when China’s ports move to limited activity at the start of the lunar year, the beginning of the year 2022 will normalize the transport and port congestion the world is facing right now. However, the brand owners, businesses, and retailers must put their resources into work to prepare themselves to stay ahead of the current crisis.
Few Tips To Stay Ahead In World Shipping Crisis
Here are some tips for the brands and businesses that rely on sea freight for fulfilling their customers’ demands.
Effective Planning For Restocking
Since the global sea trade is facing delays, effective restocking planning will help businesses stay ahead of customer demands. It requires accurate estimations of expected demand coming from the customers.
Businesses should place their order earlier to cover any delays that might occur. For instance, a brand in the US should order two to four weeks ahead of the order fulfillment.
Managing Your Purchase Orders and Costs
Since the surge in sea freight prices has spiked, the companies and importers have to plan efficiently. The prices would reflect the retail prices, but businesses can reduce per-unit costs by working efficiently.
If a business owner has a purchase order(PO) of less than container load(LCL), but closer to full container load(FCL), it is smart to increase the size of the purchase order and ship FCL. It is because the shipping remains the same per cubic foot regardless of your load. Therefore, why not utilize the empty space too?
Collaborating With A Sourcing China Company
Collaborating with a sourcing China company will save you from a lot of hassle, worries, and order management issues. The sourcing company will be your representative in China. Visiting the supplier’s company, receiving samples, order management, freight forwarding, and shipping information will be managed by the sourcing company at a lower cost than what you’ll have to incur for performing these functions. Above all, it will allow you to have a transparent movement and real-time information about your orders.
How Can GlobalTQM Help You?
GlobalTQM is a sourcing China company working to help US businessmen forward their orders smoothly. We can help you get through this global shipping crisis or at least minimize the effects on your business operations.
With our order management service, we remain with you from supplier validation to negotiations, purchase order review, preparation, and handling of your purchase orders. You can get control of your international order remotely by purchasing our order management service here:
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