The Global Shipping Market Is Looking Increasingly Fragile

The global shipping market has been a depressing topic to report on this year.

We have posted two or three updates on the state of play over the last eight months, each time expecting the situation to improve. Depressingly, by the time we come back to it, it has, if anything, gotten worse.

Rising shipping rates

Freight rates have soared since the beginning of the year. Port congestion has increased and container availability has decreased. Shipping line shutouts have become a common feature.

Bloomberg reported that China has partly shut the world’s third-busiest container port after just one worker became infected with COVID-19. All inbound and outbound container services at Meishan terminal in Ningbo-Zhoushan Port were halted recently until further notice, closing approximately 25% of the port’s total container handling facilities.

This comes on top of an earlier closure of Yantian port in Shenzhen for about a month from late May. That closure led to goods backing up in factories and storage yards. Furthermore, it added to congestion at neighbouring ports.

COVID impacts China’s shipping

Rising COVID infections are resulting in increased congestion at China’s top two container ports, Shanghai and Ningbo. There are reportedly about 30 vessels queueing outside just one container terminal in Shanghai.

Not surprisingly, the latest wave of port congestion is raising the prospect of further increases in already unprecedented shipping rates. For example, 40-foot container rates recently topped $20,000 on the China to U.S. route. Demand increased further ahead of the peak U.S. shopping season, further straining already limited capacity.

Meanwhile, a shortage of haulers and high levels of port congestion is causing shipping lines to skip some port calls in Europe and to extended delivery times even after vessels are unloaded. This month, containers in the U.K. have been delayed at the port for up to two weeks before they could be delivered to their destination due to an acute shortage of road haulage drivers. The same problem across Europe is causing delays, not just between the U.K. and Europe, but also within the European continental market.

Depressingly, there seems little likely to improve the situation this year.

Demand is already ramping up ahead of the Christmas season. Retailers stocking early for Black Friday, Thanksgiving, and Christmas are adding capacity pressures to an already chaotic logistics market.

Consumers should be prepared for the possibility freight rates may rise even further and delays become even more extended as the second half of the year unfolds.

By AG Metal Miner

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