The domino effect or the consequences of COVID-19 on global trade
Transport is currently in a uniquely difficult situation. The unpredictable cascade of events triggered by the pandemic has confronted us with a global container shortage crisis. This is a crisis because the lack of containers affects entire supply chains, disrupting trade worldwide.
Where are the containers?
Many of them are in depots. Others are piled up in cargo ports, while the rest are on board vessels, especially along transoceanic routes. The greatest shortage of containers is in Asia, but Europe is also facing a deficit.
The domino effect that led to the current situation
With the spread of the pandemic from its Asian epicenter, countries went into lockdown, halting economic activity and production. Many factories were temporarily closed, which led to a large number of containers being stuck in ports. To stabilize ocean freight rates, carriers reduced the number of departing ships. This not only slowed down imports and exports but also resulted in empty containers not being collected from unloading ports. This was especially critical for Asian traders, who were unable to retrieve empty containers from North America.
What followed was a unique and unprecedented scenario. Asia, being the first hit by the pandemic, was also the first to recover. As China resumed exports earlier than the rest of the world, other nations were still facing restrictions, reduced labor forces, and minimal production.
The consequences were that almost all remaining containers in Asia were directed toward Europe and North America, but they did not return quickly enough. Massive labor shortages caused by COVID-19 restrictions in North America and Europe affected not only ports but also freight warehouses and inland transport lines. With insufficient personnel to process imports, containers began to pile up.
The unprecedented lack of containers cannot meet current supply requirements.
The largest volume is carried on the China–U.S. trade route, averaging 900,000 TEU per month. Next is the China–Europe route, with 750,000 TEU per month. These figures reflect a normal year; however, the current shipping volume has increased, reaching record-high rates this quarter.
Is there a solution
Although some measures are currently being taken to ease the deadlock – such as carriers reducing free time and detention periods for empty equipment, as well as implementing more efficient unloading systems – realistically, we will not see the global container shortage return to normal in the coming months. Unfortunately, freight rates are also expected to remain high throughout the current year.
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